Recent data from the Labor Department indicated that the U.S. economy added more jobs in June than expected, although the number was lower than the previous month’s figure. This suggests that labor demand may be cooling off in the largest economy in the world. The June nonfarm payroll number came in at 206,000, down from 218,000 in May, which was also revised down from an initial mark of 272,000. Additionally, April’s number was revised downward by 57,000 to 108,000.
Economists had anticipated the June nonfarm payroll number to be around 191,000. Despite the slight increase in jobs in June, Chief Fixed Income Strategist Kathy Jones of Charles Schwab noted that the big downward revisions in April and May indicate that the job market is slowing down. The education and health services sectors saw the biggest job increases, which helped offset losses in retail trade and mining and logging.
The unemployment rate inched up to 4.1% in June, the highest level since November 2021, exceeding expectations of matching May’s rate of 4.0%. Additionally, wage growth slowed slightly to 0.3% from 0.4% on a month-on-month basis, in line with estimates. Recent data also indicated that private sector job additions decreased last month, and the quits rate, which measures labor market confidence, remained steady, signaling potentially diminishing wage pressures.
The easing in the jobs market, and consequently in wages, could contribute to a moderation in inflation. This would support the hope that the Federal Reserve will cut interest rates from more than two-decade highs in 2024. The central bank has indicated its intention to reduce borrowing costs only once this year, as policymakers seek further evidence that inflation is consistently falling back to their 2% target.