JULY 7, 2023
The U.S. has continued to add jobs despite stubbornly high inflation and escalating interest rates. – Joe Raedle, Getty Images
Hiring slowed but remained sturdy in June as U.S. employers added 209,000 jobs despite inflation, high interest rates and nagging recession fears.
Still, that’s the weakest showing since employers shed jobs in December 2020.
The unemployment rate fell from 3.7% to 3.6%, the Labor Department said Friday.
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.
Although job growth has slowed from blockbuster gains of 472,000 in January, “This is the steady and stable growth you want to see,” Acting Labor Secretary Julie Su said in an interview. She added noted the monthly advances have moderated from the “breakneck pace” earlier in the recovery from the COVID recession.
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.
“It is unlikely to stop the Fed from hiking rates again later this month, particularly when the downward trend in wage growth appears to be stalling,” says economist Andrew Hunter of Capital Economics.
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.
The good news, from the Fed’s perspective, is that private-sector job growth slowed substantially, with 149,000 gains after 259,000 in May. 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 advances 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 pre-pandemic employment level. Retail and transportation and warehousing lost jobs.
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.
Major stock indices were down modestly shortly after markets opened as investors likely priced in another rate hike this month. The Dow Jones industrial average fell 65 points, or 0.18%, while the S&P 500 — the benchmark for many index funds used in 401(k) plans — eased 1.5 points, or 0.03%.
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 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 Sachs says. Firms worried about labor shortages bring on workers early in the year for the busy spring sales season, the research firm says.
Americans work fewer hours: The number is lower than before COVID. Here’s why.
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.
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.
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.
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.
The jobs report, released monthly, is based on Department of Labor data.
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
Courtesy/Source: This article originally appeared on USA TODAY
