US employers added fewer jobs than expected in July, raising concerns about the strength of the economic recovery and potentially delaying the Federal Reserve’s plans to scale back its stimulus program.

Key Highlights

• Nonfarm payrolls increased by 162,000 in July, below the consensus forecast of 185,000.
• The unemployment rate declined to 7.4%, the lowest level since December 2008.
• The labor force participation rate remained unchanged at 63.4%.

The report indicated moderate job gains in sectors such as leisure and hospitality, and professional and business services. However, government employment continued to decline.

Implications for the Federal Reserve

The weaker-than-anticipated job growth could prompt the Federal Reserve to maintain its current pace of asset purchases for a longer period. The Fed has previously stated that it would begin tapering its bond-buying program when the labor market shows substantial improvement.

Analysts will be closely watching upcoming economic data to assess the trajectory of the recovery and its potential impact on Fed policy.