The summary
- The Labor Department’s June jobs report showed employers added 206,000 jobs, down from 218,000 in May.
- Unemployment rose to 4.1% in June, exceeding 4% for the first time in November 2021.
- The labor market has defied long-standing forecasts of a sharper decline in hiring, but the latest figures show conditions are gradually tightening.
The economy created 206,000 jobs last month, according to new government data, but unemployment topped 4% for the first time in more than two years.
The June jobs report, released Friday morning by the Bureau of Labor Statistics, showed that hiring was stronger than economists had expected, with analysts predicting 200,000 nonfarm payrolls. That was still a slowdown from May, which was revised down to 218,000 from 272,000.
The April level was also revised sharply downward, showing that 111,000 fewer jobs were created in the previous two months than expected.
“Nonfarm payrolls in June were slightly better than expected, but downward revisions to April and May numbers were the main reason,” Kathy Jones, chief fixed income strategist at Charles Schwab, said in a Friday article on X. “The labor market is slowing.”
For months, the U.S. labor market has defied long-standing expectations of a deeper downturn. Instead, employment prospects have remained broadly strong, even as employers have been gradually slowing hiring. But the latest data show that conditions are tightening.
Unemployment rose to 4.1% in June, unexpectedly surpassing the record low of 4% that had not been reached since November 2021.
The largest job gains were in the public and health sectors, with 70,000 and 49,000 jobs added, respectively. The “professional and business services” sector, a category that includes many technology jobs, remained roughly flat throughout the year, the report said.
Workers’ wages continue to rise. Average hourly earnings rose 3.9% in June compared with the same month last year, still higher than they were before the pandemic and still outpacing inflation, albeit at a slower pace.
“We’re seeing a labor market right now that’s in what I like to call a modulated slowdown,” Nela Richardson, chief economist at payroll processor ADP, told reporters earlier this week. “It’s hitting the right note at the right time.”
ADP’s own private-sector hiring data showed Wednesday that just 150,000 jobs were added in June, less than expected, largely driven by the leisure and hospitality sector. Other labor market indicators have pointed to a continued slowdown in growth after surging hiring boosted job prospects and worker wages during the post-pandemic recovery.
On Wednesday, however, the Labor Department reported that initial jobless claims continued to rise, while ongoing unemployment claims hit their highest level since November 2021.
“While layoff rates remain low, if you unfortunately lose your job, it becomes much more difficult to find a new position,” James Knightley, chief economist at global financial group ING, said in a note to clients this week.
Beyond the labor market, the Institute for Supply Management this week reported what Knightley called a “truly awful” purchasing managers’ index survey for June.
The figure fell to 48.8, below the forecast of 52.7 and significantly down from the previous reading of 53.8. A reading below 50 is considered a signal of contraction in activity, and June was only the third time the index had shown a contraction in the past 49 months, but it was the second time in the past three months.
“Respondents indicate that activity is generally flat or declining,” Steve Miller, chairman of the ISM survey committee, said in a statement.
Economic activity is slowing, and inflation is slowing, too. Last week, the personal consumption expenditures price index, the Federal Reserve’s preferred gauge of price growth, rose 2.6% from a year earlier in May. That’s the lowest annual rate since March 2021.
In remarks this week, Fed Chairman Jerome Powell said that the risks to its inflation and employment goals “have moved much closer to balance.” In other words, the chances that the Fed will not act aggressively enough to bring inflation back to its 2% target are now close to balance, given the risks that unemployment will rise as a result.
“The longer the Fed maintains its high interest rate strategy, the greater the risk that the economy will slow too sharply,” Moody’s chief economist Mark Zandi told NBC News ahead of the new BLS data release Friday. “We’re starting to see jobless claims and layoffs rise, and the labor market is shrinking. That’s a growing concern.”
