The U.S. labor market added more jobs than expected in June, but the unemployment rate unexpectedly rose to its highest level since November 2021, another sign that the job market continues to cool. It’s a sign.
Nonfarm payrolls in the U.S. economy rose by 206,000 jobs in June, beating economists’ expectations of 190,000, according to Bureau of Labor Statistics data released Friday.
The unemployment rate rose to 4.1% from 4% the previous month, the highest level in nearly three years. The number of new jobs in June was down slightly from May, and on Friday the job growth number was revised downward to 218,000 from 272,000 initially announced last month. The combined revised figures for April and May showed the U.S. economy added 111,000 fewer jobs than originally reported.
Nancy Vanden Houten, U.S. economist at Oxford Economics, said in a note to clients: “The June employment report shows that employment growth, including revised figures, is weaker than expected, the unemployment rate is rising, and earnings growth is slowing. There are further signs of a cooling labor market, including a slowdown in the labor market.”
The S&P 500 (^GSPC) and Nasdaq Composite (^IXIC) rose on the report, continuing gains after hitting record highs earlier this week amid a slew of weaker-than-expected economic data. continued. According to Federal Reserve Chairman Jerome Powell, the U.S. is heading back on a “path to defusing inflation.”
Read more: How does the labor market affect inflation?
Ahead of Friday’s jobs report, investors are pricing in two rate cuts this year, with the first most likely to occur in September.
Investors are pricing in a nearly 75% chance that the Fed will cut interest rates in September, according to the CME FedWatch tool. The Federal Reserve last month said it likely would be appropriate to cut rates once this year.
For some, Friday’s report further strengthens the case for a Fed rate cut in the near future.
“Today’s jobs report should strengthen expectations for a September interest rate cut,” Neil Dutta, head of economics at Renaissance Macro, said in a note to clients. “Economic conditions are cooling, which makes the tradeoffs different for the Fed…Chairman Powell should use July to set September rate cuts.”
With inflation falling, jobless claims rising and the unemployment rate at its highest level in more than two years, economists believe the Fed will continue to keep interest rates at their highest levels in more than two decades. I think the situation is increasingly walking a fine line.
“Given the apparent cooling in the labor market over the past year, further weakening of the labor market is a concern and less welcome from the Fed,” Sarah House, senior economist at Wells Fargo, said in a note to clients on Tuesday. “I’m looking at it,” he said.
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Statistics released earlier this week also showed signs of a slowdown in the labor market.
On Wednesday, the ADP Institute’s National Employment Report showed that the private sector added 150,000 jobs in June, slowing from May’s 157,000 job gain.
Meanwhile, nearly 1.86 million continued unemployment insurance claims were filed in the week ending June 29, up from 1.83 million the previous week, according to Labor Department data. As a result, the number of applications has increased for nine consecutive weeks.
Elsewhere in Friday’s report, wage growth, a key measure of inflationary pressures, slowed to 3.9% from a year earlier. On a month-on-month basis, wages rose 0.3%, slowing from the previous month’s 0.4% rise.
Meanwhile, the labor force participation rate rose to 62.6% from 62.5% in the previous month.
The largest increase in jobs in Friday’s report was in government jobs, which added 70,000 jobs in June. At the same time, employment of health care workers increased by 49,000, lower than the average monthly increase of 64,000 over the previous 12 months.
Pedestrians and construction workers walk past a lit American flag in the rain in Times Square on August 22, 2013 in New York City. (Tama Mario/Getty Images) (Tama Mario, Getty Images)
Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
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