Unemployment Up as Hiring Slows; Pressures Mount for Paycheck-to-Paycheck Economy

The headline employment numbers from the Bureau of Labor Statistics Friday (Aug. 2) showed that firms added 114,000 jobs in July, and the unemployment rate hit 4.3% — a level not seen since the depths of the pandemic — up 0.2% from June.

These numbers may add some pressure to an already stressed paycheck-to-paycheck economy because the employment picture is not likely to brighten enough, in terms of job switching or wages, to help mollify the monthly pressures of making ends meet in a slowing economy.

Wages were only 0.2% higher month over month and were 3.6% higher than a year ago. That annualized pace is a slowdown from the nearly 5% rate seen earlier in the year. Service-related jobs saw some pressure, too, as the information sector shed 20,000 roles, and the leisure and hospitality cohorts were roughly flat.

The latest data release from the BLS dovetails with employment data from ADP, which noted Wednesday (July 31) that U.S. companies added 122,000 jobs in July, down from 155,000 positions in June, while wage growth increases slowed to 4.8%, the slowest pace in three years.

Muted Expectations of Wage Increases

The PYMNTS Intelligence report “Why One-Third of High Earners Live Paycheck to Paycheck” found the jobs picture was less than sanguine coming into 2024. Sixty-five percent of U.S. consumers live paycheck to paycheck. Only 38% of individuals expected that they would see wage increases this year, which was down from the 43% who expected the same in 2023. The most hard-pressed among us seemed to harbor the bleakest outlook on wages, as only 29% of consumers living paycheck to paycheck with issues paying their bills expected to see a paycheck bump this year.

Separately, 85% of consumers said their wages have not kept pace with inflation. For the low-income cohorts — those earning less than $50,000 per year (80% of whom live paycheck to paycheck) — paying for food (25%), housing (37%) and their monthly bills (13%) ate up three-quarters of take-home pay.

Late last month, the Bureau of Economic Analysis announced that the personal consumption expenditures (PCE) index showed expenditures rose 0.3% in June, outpacing disposable personal income growth of 0.2% in the same month-over-month period.

As spending outstrips income growth, pressures on the wallet only grow more pronounced. The disposable income part of the equation is influenced by wage growth, or lack thereof, and by any job loss.

Quarterly earnings reports from J.P. Morgan and McDonald’s have pointed to a pullback by low-income consumers, which may be more pronounced as the job market faces a slowdown and households are forced to refocus on their job prospects — or even job security.