In June, the United States economy added the fewest jobs in two and a half years, but persistently high pay growth pointed to still tight labor market conditions, ensuring the Federal Reserve will continue hiking interest rates later this month.
The Labor Department’s carefully watched employment report released on Friday also revealed that 110,000 fewer positions were created in April and May, indicating that higher borrowing rates were beginning to impair firms’ enthusiasm to continue hiring.
Last month, there was also an increase in the number of people working part-time for economic reasons, owing in part to lower hours due to slack employment or business conditions.
Nonetheless, the pace of job growth remains solid by historical standards, and statistics this week showing an increase in services sector activity suggested that the economy was not on the verge of a long forecast recession.
The payroll numbers suggested a weakening, but the labor market remains strong, said Sean Snaith, director of the Institute for Economic Forecasting at the University of Central Florida.
Inflation Concerns Remain Despite Latest Report
By no means is the Fed’s job finished. We’ve been fighting inflation for a long time, and nothing in today’s report says otherwise.
According to the establishment survey, nonfarm payrolls climbed by 209,000 jobs last month, the smallest increase since December 2020.
Reuters polled economists, who predicted a 225,000 increase in payrolls.
For the first time in 15 months, payrolls fell short of expectations.
Job creation averaged 278,000 per month in the first half of the year.
To keep up with the growing working-age population, the economy must create 70,000-100,000 new jobs each month.
Companies are stockpiling workers, reminiscent of the catastrophic labor shortages experienced in the aftermath of the COVID-19 pandemic slump in 2021 and early 2022.