June Jobs Report, 206,000 New Jobs in US, Unemployment Rate At 4.1%

This Friday job report shows mixed results for the US labor market. The economy gained more jobs than expected last June, but the unemployment rate increased to a level unseen since November 2021, suggesting that job growth might be slowing down.

Increase in Employment and Unemployment Rate

The Bureau of Labor Statistics reports that the economy added 206,000 nonfarm payroll jobs last June more than the expected 190,000. But the unemployment rate also climbed to 4.1%, from its previous 4% in May a peak not seen for almost three years pointing towards a slower labor market.

Job Addition Updates and Economic Climate

The number of new jobs for June is slightly less than May’s updated count of 218,000 positions down from an initial reporting of 272,000. April and May revisions show the economy achieved fewer jobs than first published strengthening signs of slower job growth.

Oxford Economics’ main US economist Nancy Vanden Houten shares that “the June jobs report showed additional setbacks with weaker job growth including updates with lower numbers an escalating unemployment rate and decelerating earnings.”

Reaction of The Market

In response to these mixed findings market response was positive. There has been significant rise in both stocks S&P 500 as well as Nasdaq Composite, as there are growing hopes that Federal Reserve could bring down interest rates considering economic slowdown.

Federal Reserve and Interests Rates Decision Making Process Continues to Be Crucial

Investors are already expecting two interest rate reductions this year even before the release of the jobs report. According to the CME Fed Watch Tool predictions are pegged at a triple fold increase of nearly 75% in September from its previous mark of 64%.

“Today’s employment data is conforming to an increased likelihood for a rate cut in September. We are observing declining economic conditions which changes the calculus that Federal Reserve will employ” says Neil Dutta from Renaissance Macro’s Head of Economics.

Growth in Wage Plus Labor Force Contributions

There is a slowdown seen in wage growth which has major influence on inflation pressures. Annual wages saw an increase of about 3.9% while monthly growth dwindled to 0.3% down from the last month’s figure of 0.4 %. The labor force contribution rose to 62.6 % up from last month’s contribution by just 0.1%

Employment Growth by Sector

  • Government Employment, Observed The maximum Job Additions with about added approximately 70000 jobs.
  • Healthcare, managed to add about half this number with about 49000 positions short of its average monthly gain by almost 15000 over last year.
  • Construction also joined ranks with significant job contributions. However, there were however visible job losses in professional / business services and retail sector reflecting existing disparities within the labor market.

Resilience Amidst Challenges in Economy

The job market continues demonstrating significant strength despite rising unemployment levels. Employers have created more than fifteen million new positions during President Joe Biden’s Administration with an impressive average tally between three hundred eighty thousand new jobs every single month but there is diminishing trend given that recent averages are only around two hundred twenty thousand each month.

PNC chief economist Gus Faucher observes “There is still a strong labor market, but it has weakened somewhat compared with the previous year. We can expect slightly reduced job growth less competitive demand for new workers and modest wage growth which helps in bringing back inflation closer to Federal Reserve’s 2 % target.”

Inflation dynamics and Future scope

Inflation which was once at its highest at 9.1% two years back continues to be more than the preference level of Federal Reserve. The primary focus remains the wage gain as it can cause higher price levels. According to Chair Jerome Powell Federal Reserve “It appears that labor market needs cooling to deal with inflation as per expectations and this seem like a reasonable ongoing process”.

Indicators point towards Slowing Labor Market

Different indicator props up against slowing down of labor market,

As per ADP Research Institute’s National Employment Report, estimated jobs added to private sector counted to approx 150000 in June slightly decreased from previous month’s count of 157000.

According to report from Department of Labor Data, For the week till June 29 close to 1.86 million continuous unemployment claims have been recorded which is consecutively ninth week of increasing claims.

Employment Scenario Amidst Trends in Economy

Recent college pass out Marcelino Bautista finding job has not been easy. Applied for more than 100 jobs before he could land a position as system programmer. He said “The search for finding my kind of job was very stressful. I mailed applications everywhere but internships or entry-level, competition was extreme.”

Final Thoughts

The June jobs report unveils mixed factors concerning US labor market. We see continuous job growth however increasing level of unemployment coupled with decelerating wage growth does point towards labor market cooling down. There is positive indication suggesting possible changes for Federal Reserve’s policies in the near future. Concerning these changes there needs to be adaptation from policy makers to jobseekers for navigating this changing landscape.

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