The U.S. labor market added more jobs than expected last month but still showed signs of cooling down. The report revealed 206,000 jobs were added in June, exceeding the expected 191,000 additions. Nevertheless, June’s job numbers were a slowdown from May’s downwardly revised 218,000 additions.
The unemployment rate increased to 4.1%, its highest level since November 2021. Additionally, hourly earnings increased by 0.3% from the previous month and 3.9% year-over-year, both consistent with their respective forecasts. Overall, the latest jobs report strengthens views that the Federal Reserve will begin to cut rates later this year.
Despite the Fed’s forecast of only one rate cut this year, the CME FedWatch Tool is currently projecting two; the first at the September meeting and the second at the December meeting. Unlike the BLS’s June jobs report, the JOLTS report highlighted a stronger-than-expected labor market, with the number of available jobs increasing for the first time in three months. Job openings increased by 221,000 to 8.140 million, surpassing the expected 7.960 million vacancies.
Despite this uptick, the overall trend in job openings continues to decline, slowly inching back to pre-pandemic levels. Other key data points from the report showed that hires, quits, and layoffs increased from the previous month. The JOLTS data serves as a barometer for assessing labor demand, and any disparity between workforce demand and supply could potentially exert upward pressure on inflation.
June jobs growth analysis
Since the beginning of 2023, the gap between demand and supply has consistently narrowed as job openings have steadily declined since their March 2022 peak. In yet another sign of a cooling labor market, private sector hiring slowed for a third straight month in June, with the addition of the fewest number of jobs in the past five months.
According to the ADP report, 150,000 private jobs were added in June, less than the projected 163,000 additions. The leisure and hospitality industry saw the most notable pickup in May, adding 63,000 jobs last month, accounting for over 40% of June’s private job growth. Midsize companies (50-249 employees) hired 65,000 jobs last month, while smaller companies (20-49 employees) decreased hiring for the fifth straight month.
The report also revealed a slowdown in pay growth for both job-stayers and job-changers. Pay gains for job-stayers were up 4.9% year-over-year, the slowest pace in almost three years. Meanwhile, pay gains for job-changers slowed for a third straight month to 7.7% year-over-year but remain higher than at the start of the year.
This week’s economic calendar will feature the latest inflation and consumer sentiment data. On Thursday, the Bureau of Labor Statistics will release June’s Consumer Price Index (CPI), followed by the Producer Price Index (PPI) on Friday. Consumer prices are expected to increase by 0.1% and 0.2% from June for the headline and core indexes, respectively.
Producer prices are also expected to increase by 0.1% and 0.2% for the headline and core indexes, respectively. Additionally, on Friday, the preliminary report for the Michigan Consumer Sentiment Index will be released, providing insight into whether consumer attitudes continue to worsen or if they have picked back up this month.
