Hiring slowed but remained sturdy in June as U.S. employers added 209,000 jobs despite inflation, high interest rates and nagging recession fears.
The unemployment rate fell from 3.7% to 3.6%, the Labor Department said Friday. That’s the highest since October.
Economists had estimated that 225,000 jobs were added last month.
Payroll gains for April and May were revised down by a total of 110,000, depicting somewhat weaker hiring in the spring than believed. The May rise in jobs was downgraded to 306,000 from 339,000
The report will likely be well received by a Federal Reserve seeking to cool job and wage growth to tamp down inflation. Still, last month’s employment gains were solid and pay increases picked up, developments that could prompt the Fed to resume its aggressive interest rate hiking campaign in a few weeks after pausing in June.
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What is the wage growth rate?
Average hourly earnings rose 12 cents to $33.58, nudging up the yearly increase to 4.4% from 4.3%. Although pay increases have slowed from more than 5% last year, they’re still too high for a Fed seeking to push them down to 3.5% or lower to align with its 2% overall inflation target.
What industries are seeing job growth?
The good news, from the Fed’s perspective, is that private-sector job growth slowed substantially. Health care added 41,000 jobs; construction, 23,000; and professional and business services, 21,000.
Leisure and hospitality added 21,000 jobs, its third straight month of relatively modest gains after driving job growth during the recovery from the health crisis as restaurants and bars ramped up hiring. The industry remains 369,000 jobs below its prepandemic employment level.
The public sector played a big role in the June job total, adding 60,000 jobs, virtually all in state and local governments. Those jobs are more volatile and less influenced by Fed interest rate moves.
Dow Jones futures
Futures tied to major stock indices were little changed in pre-market trading following the report. Dow futures slipped 0.06% while S&P 500 futures eased 0.04%. Nasdaq futures edged up by 0.06%.
How is the job market?
The labor market has defied predictions of a sharp slowdown in job growth for most of this year. It may be that industries such as leisure and hospitality are still catching up to their pre-COVID payroll levels, says Ian Shepherdson, chief economist of Pantheon Macroeconomics.
Also, many companies have been reluctant to lay off skilled workers despite softer sales because it was so challenging to find the employees amid pandemic-related worker shortages. That has kept the monthly employment totals elevated even when hiring has slowed.
June was expected to serve up more solid job gains. Since the health crisis, the arrival of the student summer workforce has bolstered a labor pool that tends to shrink by May, Goldman says. Firms worried about labor shortages bring on workers early in the year for the busy spring sales season, the research firm says.
Earlier this week, private payroll processor ADP estimated that private employers added a blockbuster 497,000 jobs in June but its tallies have varied sharply from Labor’s more reliable survey.
Eventually, possibly within just a couple of months, economists expect the Fed’s sharp interest rate hikes to dampen borrowing, along with consumer and business spending, discourage hiring and spur more layoffs. That should trigger a mild recession later in 2023, many economists say.
So far, households have absorbed the blows of high interest rates and inflation in part because of some $2.6 trillion in COVID-related stimulus checks and other savings. But those cash reserves have fallen below $1.5 trillion and low- and middle-income consumers, in particular, have depleted their funds, says Mark Zandi, chief economist of Moody’s Analytics.
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Americans are working fewer hours
In May, the typical workweek ticked down to 34.3 hours, over half an hour less than the average 35 hours clocked by workers in January 2021. That mirrored the number of hours worked right before the COVID-19 pandemic, a low surpassed only by the shrunken workweek experienced at the onset of the global health crisis in March, 2020, according to Labor Department data.
Economists and other experts say the pared down workweek is due in part to Americans wanting more flexible schedules and employers hesitating to cut positions despite the economy throttling down.
Is there a labor shortage
Worker shortages have largely ebbed, with many Americans pushed out by the COVID-19 pandemic back at work, and businesses slowing their hiring as they grapple with high interest rates and lingering worries about a possible recession.
The South, however, remains an exception. In that region, there were 2 million more jobs than potential employees in March, according to a review of Labor Department data by Moody’s Analytics. That mismatch was 13.8% lower than December but still historically high.
Fed interest rate
In June, the Federal Reserve held its key rate to a range of 5% to 5.25%, pausing the most aggressive string of hikes seen in forty years. However, the central bank signaled that the rate increases may resume with two more hikes likely this year as inflation continues to hover above the Fed’s 2% goal. Prior to last month, the Fed had boosted its benchmark rate at every meeting since January 2022.
How do they determine the jobs report?
The jobs report, released monthly, is based on Department of Labor data.
What is the ADP jobs report?
Payroll processing firm ADP publishes a separate report that tracks private-sector job creation. ADP on Thursday said its survey showed employers added 497,000 jobs in June, nearly twice as many as analysts were expecting.
How often does the jobs report come out?
The report comes out monthly, typically the first Friday. Here are the dates of remaining jobs reports in 2023:
- July 2023 Aug. 04, 2023
- August 2023 Sep. 01, 2023
- September 2023 Oct. 06, 2023
- October 2023 Nov. 03, 2023
- November 2023 Dec. 08, 2023
Latest jobs report
U.S. employers added a staggering 339,000 jobs in May, again showing the strength of the labor market despite escalating interest rates and high inflation.
What is the Fed unemployment rate?
The jobless rate, which is gauged from a separate household survey, increased to 3.7% from a 50-year low of 3.4%, in May. That was the steepest unemployment rate since October.
