overview
Employers added 206,000 roles last month, down from 218,000 in May, according to the Labor Department’s June jobs report. The unemployment rate rose to 4.1%, inching above 4% for the first time since November 2021, but remains at historic lows. The labor market has long been rebellious. Although the employment situation is steadily becoming tougher, employment is predicted to decline even more sharply.
The economy added 206,000 jobs last month, while the unemployment rate rose above 4% for the first time in more than two years, according to the latest government figures.
The June employment report released Friday morning by the Bureau of Labor Statistics showed job growth slightly higher than economists expected for a 200,000-person increase in nonfarm payrolls. This was the first slowdown since May’s level was revised downward from 272,000 to 218,000. April employment growth was also revised down significantly, showing that 111,000 fewer roles were added in the past two months than originally thought.
Kathy Jones, chief fixed income strategist at Charles Schwab, told “The job market is slowing down.”
For months, the U.S. labor market has defied long-held expectations of a sharp decline. Rather, the outlook for workers generally remains strong, even as employers ease hiring. The latest reports show that the situation is gradually getting tougher.
Workers’ wages continue to rise, with average hourly wages increasing by 3.9% in June compared to the previous year. While this is still higher than before the pandemic and still above the 3.3% inflation rate in May, it is the smallest annual increase since May 2021.
And the unemployment rate exceeded 4% for the first time since November 2021, reaching 4.1% in June. This remains a historically low level, and the increase coincides with a slight increase in the labor force participation rate. The percentage of working-age people who are employed or actively looking for work reached 62.6% in June, up from 62.5% in May.
Slower job growth combined with slower inflation could prompt the Federal Reserve to begin lowering interest rates in September, providing some relief to credit card users and people with loans and mortgages. There are widespread expectations.
Mark Hamrick, senior economic analyst at Bankrate, said: “If the job market continues to cool and inflation allows, central banks will shift some of their attention away from price stability, which is part of their mandate, and pursue the other goal of maximum employment.” “It will focus more and more on the problem.” in a statement Friday.
Last week, the personal consumption expenditure price index, which the Fed recommends as a measure of price growth, rose 2.6% in May from a year earlier. This was the lowest annual rate since March 2021.
Fed Chairman Jerome Powell said in remarks this week that risks to inflation and employment targets are “very close to being balanced.” In other words, the odds that the Fed won’t act aggressively enough to bring inflation back to its 2% target are about as likely as the odds that unemployment will increase as a result.
“The longer the Fed maintains its high interest rate strategy, the greater the risk of over-suppressing the economy,” Moody’s chief economist Mark Zandi told NBC News ahead of Friday’s jobs report. . “We’re starting to see an increase in insurance claims, layoffs, and a downturn in the job market. That’s adding to the concern.”
Shoppers at an outlet mall in Commerce, California, on June 27. Eric Thayer/Bloomberg via Getty Images
On Wednesday, the Department of Labor reported that while new jobless claims continued to rise, ongoing unemployment claims reached their highest level since November 2021.
James Knightley, chief economist at ING Global Financial Group, said in a note to clients this week that redundancy rates remain low, but added: “If you are unfortunate enough to lose your job, finding a new one is extremely difficult. It’s becoming difficult,” he said.
Still, many analysts are encouraged by the pace and direction of recent labor market trends.
“These 206,000 jobs represent full employment in an economy that is cooling towards the trend,” Joe Brusuelas, RSM’s chief economist, wrote in an article for X in response to the June report, and in September It added that the possibility of rate cuts remains a focus.
“Right now, the job market is going through what I like to call a calibrated cooldown,” Nella Richardson, chief economist at payroll processing company ADP, told reporters this week. It shows a good mood,” he said.
ADP’s own data on private sector employment showed on Wednesday that just 150,000 roles were added in June, lower than expected, mainly in leisure and hospitality.
“This is the gradual cooldown that we all expected,” Richardson reiterated on CNBC on Friday after the report, adding, “We hope that hiring will be more widespread than it is now.”
