In June, hiring activity cooled as employers scaled back on hiring due to economic challenges, including rising borrowing costs.
According to the Labor Department’s report on Friday, the U.S. added 209,000 jobs last month. This figure aligns with economists’ expectations of approximately 205,000 new jobs in June, based on a FactSet poll.
Comparatively, in May, employers added 339,000 new jobs. However, the Labor Department revised that number downward to 306,000.
Over the past year, the Federal Reserve has significantly increased interest rates, making it more expensive for businesses to grow. This move aims to control inflation, which reached a 40-year high last year. The latest jobs data suggests that while businesses are still hiring, the pace has slowed. This eases concerns of an impending recession and provides evidence to the central bank that their rate hikes are achieving their desired effects.
“The U.S. labor market moderated in June, with a decline in new job creation – a step towards the much sought-after soft landing in the economy,” said Dave Gilbertson, a labor economist at payroll management software company UKG, in an email. “The labor market is holding up very well, but it’s not on fire.”
The unemployment rate decreased to 3.6% in June from 3.7% in the previous month.
Junes’s hiring rate fell below the average of the first six months of 2023, with an average of 278,000 jobs created per month during that period. This also indicates a slowdown from the monthly job creation rate of 399,000 in 2022, as reported by the U.S. Bureau of Labor Statistics.
While some industries such as government, healthcare, social assistance, and construction experienced job growth, others like professional and business services, as well as leisure and hospitality, saw minimal change in hiring.
However, despite the weaker jobs report, the Fed may still proceed with rate hikes in July, especially considering strong wage growth, according to Capital Economics.
“With the annual wage growth rate remaining unchanged at 4.4%, it is still too high to align with 2% inflation and suggests that further improvements in labor market conditions are necessary,” wrote Andrew Hunter, Capital Economics’ deputy chief U.S. economist, in a research note.
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