Halfway through the year, and four years removed from the downturn caused by the coronavirus pandemic, the U.S. jobs engine is still cruising — even if it’s showing signs of slowing.
Employers posted another solid month of hiring in June, the Labor Department reported Friday, with 206,000 jobs added for the 42nd straight month of job growth.
At the same time, the unemployment rate rose by one-tenth of a point to 4.1 percent, up from 4 percent and surpassing 4 percent for the first time since November 2021.
The jobs gain was slightly larger than most analysts had forecast. But the totals for the previous two months were revised downward, and the increase in unemployment was unexpected. This has led many economists and investors to turn from full confidence in the job market to some concern.
“These numbers are good numbers,” said Claudia Sam, chief economist for New Century Advisors, cautioning against overly negative interpretations of the report.
But “the importance of the unemployment rate is that it can really tell us about where we’re going,” he said, adding that the rate has been rising since hitting a half-century low of 3.4 percent early last year.
Wage gains are also modest. Average hourly earnings rose 0.3 percent from the previous month in June and 3.9 percent from a year earlier, compared with a 4.1 percent annual change in May. But in good news for workers, wage gains have outpaced inflation for about a year.
Market response to Friday’s report was muted, with stocks rising modestly. However, yields on government bonds edged lower, reflecting traders’ growing confidence that the Federal Reserve will begin cutting interest rates.
The benchmark interest rate is now above 5 percent, more than a year into the central bank’s drive to bring inflation under control, near zero by early 2022. The impact on lending across the economy has lasted longer than many businesses — or households looking to buy a home or car — had anticipated.
Most economists expect further declines in job and wage growth until the central bank acts to ease credit conditions. Evidence of a slowdown is mounting.
Layoffs are very low, but so is an indicator called the hiring rate — which tracks the number of people hired in a month as a share of overall employment. — has fallen significantly. This means that relatively few people lose their jobs and, in general, have more trouble finding new opportunities.
Three-quarters of the job gains reported in June came from health care, social assistance and government. Some other industries generated much smaller increases, and some, including manufacturing and retail, lost jobs altogether.
A large part of government recruitment is part of Long awaited Catch up with state and local governments, bemoaned understaffing and only recently rebounded to their pre-pandemic employment peak. The aging of the U.S. population has created a continued high demand for health care workers and other care workers.
Economists tend to feel more optimistic, however, when the bulk of employment comes from sectors that signal private sector momentum.
“Job postings are shrinking,” said Nick Bunker, director of economic research at the recruiting site.
The long-term unemployed – people who have been out of work for 27 weeks or more – may partly explain why. Now it’s up Its 2017-19 average.
With inflation at 2.6 percent, not far from the central bank’s target of 2 percent, some analysts worry that the central bank’s current stance will boost the job market. Central bank officials have signaled over the past month that they will be at multi-decade highs by cutting rates amid a sudden weakening in the labor market.
The central bank’s policymakers will meet later this month and again in September to set rate policy. While some investors and financial analysts reacted to June’s employment numbers, officials said not to wait too long.
“Conditions are cooling in the labor market,” said Neil Dutta, head of economic research at financial firm Renaissance Macro Research. “The tradeoffs for the central bank have changed. If they don’t cut this month, they need to give a strong signal that a cut is coming in September.
As the financial world waits for the next move, American households continue to spend at a subdued, if somewhat subdued, tempo. Last month, the Transportation Security Administration screened a record number of passengers at airports. Recent corporate earnings reports suggest that consumers, although more selective than ever, are in good shape overall. Since the beginning of the year, the stock market has hit new highs, registering an impressive 17 percent return.
In many ways, the financial picture for American families is brighter than it was before the pandemic. At the end of 2019, American households will have about $980 billion “Checkable Deposit” — Amount of cash assets in checking, savings, and money market accounts. Now, that number stands Over $4 trillion.
When that wealth is there Cumulatively upwardThere are gains in wealth and income was widespread. The net worth of the bottom 50 percent of households is now $3.8 trillion, up from $1.9 trillion before the pandemic. For non-managerial workers – eight out of 10 in the workforce – wage growth has been much stronger than the overall average.
For privately-owned businesses with fewer resources than large corporations, the economy of the past four years has presented a sometimes nauseating roller coaster of challenges. Brothers Massen and Afif Baldaki own various hospitality businesses in the Houston area — including an event venue, a sports bar and a few cafes — along with some investment partners.
2021 and 2022 were crowded when people spent more happily. And “it’s not an easy business,” Mazen Baltagi said, especially since food, labor and construction costs have skyrocketed.
Still, from his perspective, “Texas is growing.”
In this interest rate environment, “banks don’t really lend to restaurants right now,” he added, but he and his brother are making enough sales — and from new partners — to fund upcoming expansions.
A combination of adaptability and profitability among businesses is a model of the forces that helped America avoid the recession many experts expected. But polls of business executives suggest many are waiting for borrowing costs to drop before plunging into fresh debt or capital investments.
The question now is whether the central bank will cut interest rates to keep the expansion going. More data reports on consumer prices will be important as summer begins.
Financial markets “only need inflation data to cooperate,” said Samuel Rhines, an economist and macro strategist at Wisdom Tree. “Then it’s game on.”
