"The economic data are yet again subordinate to political and market events, which have made a September easing more likely", said Ian Shepherdson of Pantheon Macroeconomics.
The U.S. -China trade war is taking a toll on manufacturing, with production declining for two straight quarters. Those fears sent the S&P 500 to its worst week this year.
Payrolls rose 164,000, nearly matching projections, though the two prior months were revised lower, according to a Labor Department report Friday. Construction added just 4,000 jobs, well below its average of 16,800 over the previous year.
And a survey of the USA manufacturing sector showed the fourth consecutive monthly decline in July, increasing worries about domestic industries.
A broad measure of unemployment, including people working part time because they can not find a full-time gig, fell to its lowest level in almost 19 years.
Payroll gains for July were spread out among a number of industry sectors. In July, employment increased by 11,000 in computer systems design and related services; this industry accounted for about one-third of employment growth in professional and technical services both over the month and over the year.
Trade wars and slower growth are not a good combination and pose a risk to the world economy, but, "Encouragingly, US households are still spending", Daco said. Average hourly earnings rose 3.2% from a year ago, up from a 3% year-over-year gain in June.
In July, the labor force participation rate was 63.0 percent, and the employment-population ratio was 60.7 percent.
Wage growth was solid in June, with monthly earnings ticking up by 0.3 percent (better than the expected 0.2 percent).
A broader measure of unemployment, which includes people who want to work but have given up searching and those working part-time because they can not find full-time employment, fell two-tenths of a percentage point to 7.0% last month, the lowest level since December 2000. That would be fewer than the blockbuster increase in June, but enough to keep unemployment levels near historic lows.
Gross domestic product, a broad measure of goods and services across the economy, increased at a 2.1% annual rate in the second quarter, down sharply from a 3.1% pace in the first quarter. Factory overtime fell by 0.2 hour to 3.2 hours.
The results would mean the labour market added jobs for a record 106 straight months, even as the sugar high from tax cuts fades and as President Donald Trump escalates tariff disputes with some of the US's largest trading partners.
"As usual, Powell let us down, but at least he is ending quantitative tightening, which shouldn't have started in the first place - no inflation". A moderation in government employment is anticipated after payrolls surged by 33,000 jobs in June, the most since August 2018.
"A prolonged drop in hours worked signals that businesses may reduce hiring, with layoffs and cutbacks in private spending to potentially follow, said Beth Ann Bovino, U.S. chief economist at S&P Global Ratings in NY".
There were also increases in healthcare, leisure and hospitality, financial activities and wholesale trade employment.
Retail jobs continue to be a weak point, with 3,600 lost in July.