summary
- The Labor Department’s June employment report showed employers added 206,000 jobs last month, down from 218,000 in May.
- The unemployment rate rose to 4.1%, the first time it had risen above 4% since November 2021, but remained at a historically low level.
- The labor market has been steadily tightening, contrary to long-held predictions of a sharp decline in employment.
The economy added 206,000 jobs last month, according to the latest government data, but the unemployment rate remained above 4% for the first time in more than two years.
The Bureau of Labor Statistics’ June jobs report, released Friday morning, showed nonfarm payrolls rose by 200,000, slightly more than economists had expected. This marked the first slowdown since May, when payrolls were revised downward from 272,000 to 218,000. April payrolls gains were also revised down sharply, showing that 111,000 fewer jobs were added in the previous two months than initially expected.
“June’s nonfarm payroll gains were slightly stronger than expected, but the story is the big downward revisions to April and May,” Cathy Jones, chief fixed income strategist at Charles Schwab, wrote in a post on X Friday. “The job market is slowing.”
The U.S. labor market has been bucking long-term predictions of a sharper decline for months, with workers’ prospects instead holding up broadly as employers hold off on hiring. The latest report suggests conditions are gradually tightening.
Workers’ wages continue to rise, with average hourly earnings up 3.9% year-on-year in June. That’s still higher than before the pandemic and above the inflation rate of 3.3% in May, but it’s the lowest annual increase since May 2021.
And the unemployment rate rose above 4% for the first time since November 2021, reaching 4.1% in June. That’s still a historically low level, and the rise coincides with a slight increase in the labor force participation rate. The measure of the working-age population who are employed or actively looking for work was 62.6% in June, up from 62.5% in May.
The combination of slowing job growth and easing inflation has stoked widespread expectations that the Federal Reserve will begin cutting interest rates in September, which would provide some relief to credit card users and those with loans and mortgages.
“If the job market continues to cool and inflation becomes tolerable, central banks may shift their focus a little bit away from the price stability part of their mandate and increasingly toward the other side of it: maximum employment,” Mark Hamrick, senior economic analyst at Bankrate, said in a statement Friday.
Last week, the personal consumption expenditures price index, the Fed’s preferred gauge of price inflation, rose 2.6% year-on-year in May, the slowest annual increase since March 2021.
Speaking this week, Fed Chairman Jerome Powell said the risks to its inflation and employment goals are “pretty balanced” — in other words, the odds that the Fed will not act aggressively to bring inflation down to its 2% target are now roughly equal to the chances that unemployment will rise as a result.
“The longer the Fed maintains its high interest rate strategy, the greater the risk of overly constraining the economy,” Mark Zandi, chief economist at Moody’s, told NBC News ahead of Friday’s jobs report. “We’re starting to see rising jobless claims, rising layoffs and a weakening of the job market, which is increasingly concerning.”
The Labor Department reported Wednesday that initial claims for unemployment insurance continued to rise and that continuing jobless claims reached the highest level since November 2021.
Layoffs remain low, James Knightley, chief economist at ING Global Financial Group, said in a client note this week, but “if you are unfortunate enough to lose your job, it is now much harder to find a new one.”
Still, many analysts are encouraged by the pace and direction of recent labor market developments.
“The 206,000 figure gives an indication of where full employment stands as the economy is once again trending downward,” RSM chief economist Joe Brusuelas wrote on X following the June report, adding that the possibility of a rate cut in September remains in focus.
“Right now, the job market is experiencing what we call a calibrated cool-down,” Nella Richardson, chief economist at payroll firm ADP, told reporters earlier this week. “It’s just hitting the right spot at the right time.”
Private sector employment data released by ADP on Wednesday showed that just 150,000 jobs were added in June, below expectations, and that was mainly driven by the leisure and hospitality industry.
“This is the gradual lull that we all expected,” Richardson reiterated on CNBC on Friday after the report, but added that he would “like to see adoption become much broader than it is now.”
