US companies added 148,000 workers to payrolls in July (on a seasonally adjusted basis), the Labor Department reports. The gain is below June’s increase, but the one-year trend for private payrolls was steady, as expected, at a respectable +1.7%.

Today’s update reaffirms that the expansion of the US labor market has decelerated this year, but so far the downshift has been modest and, for the moment, isn’t threatening in terms of raising warning signs for recession risk. Notably, the year-over-year change in private payrolls was unchanged at a moderate +1.7%. Although the annual pace has fallen from the previous peak (+2.1% in January) and is far below the highest one-year gain since the last recession ended (+2.6% in February 2015), today’s release suggests that moderate growth for the labor market, and by extension the economy, prevails.

Some analysts are quick to argue that the slowdown in the payrolls expansion is a warning sign. Perhaps, but it’s important to keep in mind that the current expansion, which this month officially became the longest on record (121 months), is running out of bodies to hire. The official jobless rate remained unchanged at a low 3.7% last month, which serves as a reminder that finding qualified workers for open positions is challenging these days.

In any case, today’s results fall in line with The Capital Spectator’s business-cycle analysis in recent history, namely: softer economic growth has yet to raise recession flags. As outlined late last month, “For now, slow growth remains the working assumption, a view that’s based solely on the numbers published so far (along with some cautious modeling for projecting the missing data and looking ahead through August).”

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There are risks, of course, and so the potential for blowback is more than trivial for an economy that’s downshifted in recent history. The main threat remains the risk of an escalating trade war—a risk that jumped considerably yesterday in the wake of President Trump’s announcement that the US will impose yet another round of tariffs on Chinese goods on September 1. Not surprisingly, China has vowed to retaliate.

No one’s really sure how the simmering trade conflict between the world’s two largest economies will play out, or how much damage it will inflict on global growth. But there’s little doubt that the trade war has already created headwinds. As one example, yesterday’s July survey data for global manufacturing activity (via J.P. Morgan Global Manufacturing PMI) revealed that a mild contraction for the sector continued for a third straight month.

“July PMI data signal that the global manufacturing sector remained on a weak footing at the start of the third quarter,” says a J.P. Morgan spokesperson. “The PMI implies no growth in global manufacturing output with the deteriorating trend in international trade flows weighing particularly heavily on performance.”

The potential for deeper trouble can’t be ruled out, for the US, China or the global economy. Much depends on how the Washington-Beijing trade disput plays out. At the moment, optimism is in short supply and so the next several months could be rocky.

In the meantime, based on the data published to date, the US economy continues to show a degree of resiliency. It’s anyone’s guess what happens next, but for now the labor market is expanding at a moderate pace. That alone doesn’t immunize the US from recession risk in the months ahead, but it helps.

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