209,000 Jobs Added in June Despite Slower Hiring
Employers in the United States exhibited a cautious approach to hiring in June, but the overall job gains were solid, with 209,000 positions added.
This unexpected resilience of the economy poses a challenge to the Federal Reserve’s efforts to slow down growth and control inflation.
According to seasonally adjusted statistics, there was minimal change in truck transportation jobs from May to June, with a loss of approximately 200 jobs.
With the latest evidence of economic strength, it is highly likely that the Federal Reserve will resume its interest rate hikes later this month. This decision comes after a series of 10 rate increases aimed at curbing inflation.
June’s Hiring Figures and Wage Growth
Although the June hiring figure, as reported by the government on July 7, represents the smallest increase in two and a half years, it still indicates a robust labor market with a historically high number of advertised job openings. The unemployment rate dropped from 3.7% to 3.6%, nearing a five-decade low.
The report highlights the durability of the job market, with several details reinforcing this notion. The average workweek slightly increased, indicating strong customer demand that keeps employees busy. Moreover, wage growth accelerated, with hourly pay rising 4.4% compared to the previous year. Wages are now outpacing year-over-year inflation, which stood at 4% in May.
The wage data is likely to raise concerns at the Federal Reserve, as faster wage gains can perpetuate inflation by leading companies to raise prices to offset higher labor costs. The central bank aims to see a slowdown in hiring and wage increases before halting its rate hikes.
Julia Coronado, president of MacroPolicy Perspectives, an economic research firm, described the report as a “Goldilocks report” – a resilient labor market that is neither too hot nor too cool.
Private-Sector Job Gains and Sectoral Insights in June
Dean Baker, senior economist at the Center for Economic Policy Research, observed that excluding government hiring, private-sector job gains totaled 149,000 in June, indicating a sustainable pace that does not suggest an overheating economy that would concern the Federal Reserve.
The report notes that employment in transportation and warehousing experienced little change in June, with a decrease of 7,000 jobs in couriers and messengers and warehousing and storage, while air transportation added 3,000 jobs.
In addition, the government downgraded its estimate of job growth for April and May combined by a significant 110,000, further indicating a slowdown from the rapid pace of hiring seen last year.
Economic Challenges Amidst Job Growth
While the economy faces challenges such as high interest rates, elevated inflation, and concerns about a possible recession resulting from the Federal Reserve’s tightening policies, many industries continue to add jobs to meet consumer demand and restore their workforce to pre-pandemic levels.
The steady pace of hiring and rising wages have enabled consumers to maintain spending on various services, including travel, dining out, and entertainment events. Despite economists’ repeated predictions of an upcoming recession later this year or next year, a downturn is unlikely as long as companies continue to fill jobs steadily.
The Federal Reserve has aggressively increased its key interest rate by 5 percentage points, the fastest pace of rate hikes in four decades. These hikes have made mortgages, auto loans, and other forms of borrowing significantly more expensive.
Some Fed officials are seeking signs of improved balance in the job market, aiming for a better alignment between the supply and demand for workers. Following the pandemic, the number of available jobs surged above 10 million, reaching a record high.
The increasing demand for labor coincided with many Americans leaving the workforce to retire, avoid COVID-19, take care of family members, or prepare for new careers. To attract or retain employees, companies offered higher pay and better benefits due to the difficulty in filling job openings.
Trends in Labor Supply and Worker Demand
There has been progress in aligning supply and demand: more people have started seeking employment in recent months, and most of them have found jobs. As the labor supply has improved, businesses have reported an increase in job applications. Although the number of job openings decreased in May, indicating a gradual cooling of worker demand, it remains higher than pre-pandemic levels.
On the other hand, fewer Americans are quitting their jobs to search for new positions, which could indicate a potential slowdown in the job market. Following the pandemic, the number of job quitters had surged as many sought more fulfilling or higher-paying jobs, putting pressure on companies to raise wages. In May, approximately 4 million Americans left their jobs, an increase from April but below the peak of 4.5 million reached last year.
Recent reports suggest that the economy has continued to expand and that the demand for workers remains high. A survey conducted on July 6 among service providers, including banks, restaurants, and shipping companies, revealed that the sector experienced healthy growth in June, with services companies accelerating their hiring compared to May.
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