US: Payroll Gains Decelerate in June, While Unemployment Rate Ticks up to 4.1% – Action Forex
The recent data for June reveals a mixed picture of the US labor market, reflecting both resilience and emerging pressures. According to the latest report, non-farm employment saw an addition of 206,000 jobs, overshadowing the anticipated figure of 190,000. Despite this, the net gain appears less impressive when considering significant downward revisions for the previous two months, totaling approximately 111,000 fewer jobs than initially reported.
The composition of job growth in June saw the bulk of private payroll increases, 136,000 positions, with substantial contributions from the health care and social assistance sector (+82.4k) and the construction industry (+27k). These sectors showcased robust demand and continued to be essential drivers of employment growth.
An examination of the household survey indicates a smaller increase in civilian employment, with 116,000 new jobs, compared to a larger 277,000 increment in the labor force. This discrepancy nudged the unemployment rate up by a tenth of a percentage point to 4.1%, a figure that hasn’t been reached outside of pandemic circumstances since early 2018. Concurrently, the labor force participation rate experienced a slight elevation, moving to 62.6%.
Average hourly earnings (A<|disc_thread|>
SmithsonianJOLtsha: HE) analysis indicates a subdued month-over-month growth of 0.3%, trailing behind May’s performance. Over a year, AHE growth moderated to 3.9%, showing a decline from the 4.1% observed in May, with a more pronounced dip in the three-month annualized rate from the preceding figure to 3.6%.
Key Implications
The employment landscape in June, while displaying continued job growth, also highlights the beginning of a tempering phase. The considerable downgrades in job figures for the previous months condense the second quarter’s total employment growth to 607,000—marking the smallest quarterly increase in four years. This slowdown aligns with other indicators suggesting that various labor market dynamics—such as hiring and quitting rates, as well as the ratio of job openings to unemployed individuals—have reverted to or dipped below their pre-pandemic standards.
The upward nudge in the unemployment rate to a new cycle high of 4.1% may raise concerns about job availability and market tightness. However, this development, especially against the backdrop of reducing average hourly earnings growth, could be interpreted with cautious optimism by the Federal Reserve. Lower wage inflation may alleviate some pressures on overall inflation, providing a potential pathway to a more balanced economic environment.
Federal Reserve Chair Powell has recently pointed out that while recent inflation metrics have shown promise, the institution needs further assurance before considering any change in its policy stance. Therefore, the employment report for June, especially with its indication of a cooling labor market and moderated wage pressures, is likely to be a critical piece in the puzzle as policymakers prepare for the upcoming June Consumer Price Index (CPI) inflation report.
In summary, the US labor market in June continued to add jobs, but the pace of growth has evidently slowed, and adjustments in previous months’ data suggest a more subdued environment than earlier believed. With unemployment slightly rising and wage growth cooling, the Federal Reserve could view these trends as aligning with the necessary conditions for inflationary pressures to ease, awaiting further data to solidify their outlook.
