Job growth in the United States slowed down in June, suggesting a cooling economy, as the US Federal Reserve deliberates on potential interest rate hikes to combat inflation. According to the latest report from the US Labor Department, the US economy added 2,09,000 jobs last month, down from a revised figure of 306,000 in May. However, the unemployment rate changed little to 3.6 per cent, underscoring the enduring strength of the labor market.
The US Labor Department on Friday said, “Total nonfarm payroll employment increased by 209,000 in June, as employment in government, health care, social assistance, and construction continued to trend up. Nonfarm employment has grown by an average of 278,000 per month over the first 6 months of 2023, lower than the average of 399,000 per month in 2022.”
The June job data defied economists’ predictions of a possible slowdown or recession on the horizon. Despite the slowdown in job growth, the labor market continues to remain resilient. This is even as the US Federal Reserve has implemented a series of rate hikes amounting to 500 basis points (bps) since March 2022 to tighten liquidity and slow the pace of the economy to control inflation. This period marked the fastest monetary policy tightening undertaken in over four decades.
Economists surveyed by the news agency Reuters had anticipated an increase of 2,25,000 payrolls. The number of new jobs added in June also fell below the median expectation of 2,40,000 in a survey of economists conducted by MarketWatch, as per AFP.
However, according to AFP, analysts believe that the Federal Reserve is unlikely to delay another interest rate hike at its upcoming meeting even as new jobs decline.
“It’s a step in the right direction, but we’re not near the level that we would need to see to be convinced that the labor market is significantly cooling down. The labor market is still very strong, wages are still rising at a very strong pace, unemployment is still very low, and nonfarm payrolls rose at a pace that is way above what the Fed wants,” Oxford Economics’ lead US economist Oren Klachkin told AFP.
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As per the data released on Friday, average hourly earnings increased by 0.4 per cent in June, following a similar rise in May. Over the 12-month period ending in June, wages grew by 4.4 per cent, aligning with the increase seen in May.
Unemployment rates experienced significant improvements among minority workers, particularly Black workers, who faced several months of reduced employment, as per the US Labor Department. On the other hand, women overall had a strong month, with the prime-age participation rate reaching a new high.
June’s new jobs came mainly from increases in employment in government, health care, social assistance, and construction, the Labor Department said.
As per the AFP report, US President Joe Biden hailed Friday’s jobs report as evidence of “Bidenomics in action.”
“Our economy added more than 200,000 jobs last month — for a total of 13.2 million jobs since I took office. That’s more jobs added in two and a half years than any president has ever created in a four-year term,” he said in a White House statement.
The recently released minutes of the Federal Reserve’s previous meeting revealed that several members of the rate-setting committee advocated for another interest rate hike in June in order to address elevated inflation levels.
However, the Federal Open Market Committee (FOMC) ultimately decided to pause its series of ten consecutive rate increases. The minutes indicated that two more rate hikes would probably be necessary by the end of the year to effectively reduce inflation to the desired level.