Another slowdown in hiring last month showed the post-pandemic labor market is officially over for the US economy.

The US economy added 187,000 jobs in July, the fewest since December 2020 and well below the average job gains of 312,000 per month seen over the last year. And for some Wall Street economists, this report serves as another sign the post-pandemic labor market rush to hire is over.

"The big picture here is that the wave of post-Covid catch-up hiring now appears to be over, and modest downward cyclical pressure is now the dominant force in payrolls," said Ian Shepherdson, chief economist at Pantheon Macroeconomics, on Friday.

Last year, there were more than 6.3 million new jobs added to the economy, the most since 1940 when the BLS began tracking these figures. In 2021, the US economy added 4.13 million jobs, which had been the most since 1984 before last year's record figures.

Together, these 10.4 million jobs more than offset the 8.74 million jobs lost during 2020 as a result of the pandemic.

The torrid pace of hiring seen as the economy snapped back from the pandemic has slowed markedly this year. Through July, the economy has added 1.8 million new jobs — nothing to scoff at but a clear downshift from the last two years.

Speaking at a press conference last month, Fed Chair Jay Powell continued to characterize the labor market as "very tight."

Against what had been widespread expectations for a recession this year the US labor market — and economy overall — remains resilient in the face of higher interest rates as inflation has moderated and consumer spending has held up.

Moreover, some commentators see a limit on just how low payroll growth can go given persistent staffing shortages still found in pockets of the economy.

"As we have witnessed some slowing in segments of the labor markets, we have also argued several times in the past that there may be some structural limits to this slowing today, as many services industry segments remain structurally understaffed," said Rick Rieder, CIO of Global Fixed Income at BlackRock, in an email on Friday.

"In fact, it's clear to us that there's a persistent need for workers in the labor-intensive service sectors, such as in healthcare, education, restaurants, hotels, air travel, etc., which has been buoying the economy in a very constructive way." In July, the healthcare and social assistance industry created 87,100 new jobs, nearly half of all the jobs added to the economy.

Rieder also noted manufacturing investment, new home demand, and a return to pre-pandemic spending patterns towards services and away from goods all continue to bolster the labor market.

The Fed outlook

For investors, the import of any jobs report is really about what it means for the future of Federal Reserve policy.

Following July's jobs data, markets were expecting to see the Fed hold rates steady in a range of 5.25%-5.5% at its policy meeting next month, data from the CME Group showed Friday.

After the Fed's decision to raise rates by another 0.25% earlier in July, Powell said there were "continuing signs that supply and demand in the labor market are coming into better balance."

On this basis, the July jobs report offers a somewhat mixed picture.

Hiring continued to slow. And as noted by Paul Ashworth, chief North America economist at Capital Economics, on Friday, "cyclical sectors of the economy contributed less than 100,000 additional jobs, pointing to a real economy that, echoing the muted survey-based evidence, is a lot weaker than the pick-up in second-quarter GDP growth suggested."

However, wages grew more than expected last month, rising 0.4% from June to July and 4.4% over the same month in 2022. Economists had expected more modest increases of 0.2% and 4.2%, respectively.

"Average hourly earnings (AHE) rose by more than expected, due to an acceleration in wage growth for workers in goods-producing industries," wrote Nancy Vanden Houten, lead US economist at Oxford Economics, in a note on Friday. "Wage growth continues to be too strong for the Fed although other measures less subject to the composition of earnings are pointing to wage pressures easing, if only gradually."

"I don't think we're targeting wage inflation," Powell said last week. "I think what we're looking for is a broad cooling in labor market conditions."

Ashworth also noted that as productivity gains accelerate, wage growth "is no longer necessarily a deal-breaker for the Fed."

In the second quarter, worker productivity rose at an annualized rate of 3.7%, the fastest pace since the fourth quarter of 2017 when excluding the pandemic-influenced readings in 2020.

For a Federal Reserve, then, that has been pushing out a message of wanting to "take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments" before making its next move, a jobs report that offers both arguments for and against the strength of the labor market is a satisfying splitting of the difference.

"It's a Goldilocks report," ZipRecruiter chief economist Julia Pollak told Yahoo Finance Live on Friday.

"It shows a graceful descent in the labor market to a sustainable cruising altitude. Around 150,000-200,000 jobs added each month is a perfect number that will continue to keep unemployment low and keep job seekers, and even recently laid off workers, finding new opportunities."

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