Job Growth Ever So Softer

Posted by Jeffrey J. Roach, PhD, Chief Economist

Tuesday, August 8, 2023


  • This morning, the National Federation of Independent Business (NFIB) released their latest insights from their July survey and hiring plans have trended lower since mid-2021.
  • We are starting to see this softer trend show up in the jobs report. Headline payrolls rose by 187,000 in July, with the prior month’s gain revised down from 209,000 to 185,000.
  • The high correlation between this survey and job growth implies the labor market should loosen in the coming months and provide leeway for the Federal Reserve (Fed) to pause at their next meeting.
  • Markets should respond favorably to softer job growth if it translates into easing inflation pressures.


The Bureau of Labor Statistics (BLS) reported nonfarm payrolls grew by 187,000 in July, just shy of consensus. This, however, marks a slight uptick from the revised June figure of 185,000. The healthcare sector was the biggest contributor, adding 63,000 jobs, followed by social assistance (24,000) and financial activities (19,000). Labor force participation came in at 62.6% for the fifth straight month, while the unemployment rate ticked down to 3.5%, from a previous 3.6%.

Although July’s BLS report showed a steady pace of hiring, the longer-term path in hiring has displayed signs of slowing over the past year. The chart below highlights the overall trend since July 2022.

View enlarged chart

July’s report shows we haven’t yet seen the marked slowdown in hiring, which usually accompanies an economic downturn. This data lends itself to the soft landing narrative which is taking hold. If we continue to see consumer demand, then companies will continue to hire in order to meet their needs. However, consumer debt as measured by credit card balances, has now reached warning-sign levels. Credit card interest rates were 20.86% as of the last reading in May, which marks the highest level since the data series began in 1972. It’s important to note that elevated balances and record-level borrowing rates cannot be sustained.


Leading indicators of job growth show signs of further softness. This morning, the NFIB released their latest insights from their July survey and hiring plans have trended lower since mid-2021. We are starting to see this softer trend show up in the jobs report. As shown in this second chart below, the NFIB survey and the monthly jobs report are highly correlated, and according to the latest report from business owners, investors should expect hiring to slow as we enter the latter months of 2023. Investors should expect the markets to respond favorably to softer job growth if that growth remains positive. So far, we aren’t seeing signals of contraction yet, so as long as inflation decelerates further, the Fed should pause its tightening cycle at the next meeting.

View enlarged chart


This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors. To determine which investment(s) may be appropriate for you, please consult your financial professional prior to investing.

Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments. For more information on the risks associated with the strategies and product types discussed please visit  

References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.

Unless otherwise stated LPL Financial and the third party persons and firms mentioned are not affiliates of each other and make no representation with respect to each other. Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services.

All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

Securities and advisory services offered through LPL Financial, a registered investment advisor and broker-dealer. Member FINRA/SIPC.

Not Insured by FDIC/NCUA or Any Other Government Agency | Not Bank/Credit Union Deposits or Obligations | Not Bank/Credit Union Guaranteed | May Lose Value

View All Posts