US job gains moderated in June while wage growth remained firm, showing a strong enough labor market to keep the Federal Reserve on track to raise interest rates this month.
Nonfarm payrolls increased 209,000 — the smallest advance since the end of 2020 — after downward revisions in the prior two months, a Bureau of Labor Statistics report showed Friday. The unemployment rate fell to 3.6%.
The latest figures suggest the labor market is losing some steam as high-interest rates and months of sluggish consumer spending feed into concerns about the economy’s prospects. Yet with sufficiently healthy job growth and brisk wage gains, the Fed is likely to resume its series of rate hikes at its meeting later this month, following a pause in June.
Metric
Actual
Median Estimate
Change in payrolls (MoM)
+209k
+230k
Unemployment rate
3.6%
3.6%
Average hourly earnings (MoM)
+0.4%
+0.3%
“We need to see some of the tight labor market conditions ease so the Fed feels more confident that wages will begin to ease,” Lindsey Piegza, chief economist at Stifel Financial Corp., said on Bloomberg Television.
It was the first time in 15 months that payrolls came in below the median estimate in a Bloomberg survey of economists. Longer-term Treasuries and the S&P 500 fell.
Hiring was concentrated in a few sectors, led by health care, government, and construction. Payrolls fell in retail trade and transportation and warehousing. For the prior two months, payroll growth was revised down by a combined 110,000.
What Bloomberg Economics Says...
“The deceleration in June hiring and the downward revision of past months’ payrolls aren’t enough to put the Fed at ease. Though labor supply and demand are coming into better balance, monthly gains in wages and hours worked to add to an inflationary impulse that the Fed will need to tame, given its focus on super core services inflation,” Stuart Paul and Eliza Winger, economists
The increase in average hourly earnings followed similar gains in the prior two months and was up 4.4% from a year earlier. The average workweek edged up.
The mismatch between labor supply and demand is coming into better balance in part due to more participation. While the overall participation rate — the share of the population that is working or looking for work — held steady, for those ages 25-54, that rate climbed to a 21-year high.
“The labor market is slowing down, but it’s doing so from a position of strength,” Nick Bunker, research director at Indeed Hiring Lab, said in a note. “Nothing is guaranteed, but the US labor market continues to point toward a slower, but more sustainable pace of economic growth.”
Other highlights:
The employment-population ratio for those ages 25-54 — or the share of the population that has a job — rose to the highest since 2001.
The jobless rate for Black workers rose to 6%; employment for Black workers in the last three months has declined by 3%, one of the largest declines on record.
In another sign of cooler labor demand, the number of people working part-time for economic reasons surged by the most since April 2020.
The underemployment rate, a broader measure that includes those who prefer full-time work, increased to the highest since August.
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