Job growth slows, unemployment rises a bit
Employers added 206,000 payroll jobs in June, according to the new jobs report just released by the US Department of Labor.
That was just slightly above the consensus economist forecast of 190,000. But, on many other measures, we see a labor market that is gradually cooling.
Perhaps the most important numbers in the report were the downward revisions to estimates of job growth in April and May. Payroll growth was revised down from 165,000 to 108,000 in April, and from 272,000 to 218,000 in May. The latter revision is particularly important, since the initial job growth measure for May suggested a labor market that remained much stronger than many of us expected. With the downward revisions, payroll growth has averaged 177,000 over the past 3 months – still solid, but not red hot by any means.
Payrolls in June rose in government jobs, health care (as usual) and construction. But they were flat or declining somewhat in manufacturing, professional services, retail, and leisure/hospitality. Temp jobs, which are very sensitive to labor market changes, declined by 49,000. The lack of broad-based job growth across sectors of the economy indicates a cooling market overall.
Wage growth was also quite moderate, after being stronger in May. Average wages rose 10 cents to $35.00 – an increase of just 3.4% when annualized. Over the past two months, they have averaged 4.3%. These numbers are not inflationary, as long as productivity growth remains solid and near 2% or more (as it was for most of 2023).
On the household side of the labor market, the unemployment rate ticked up slightly to 4.1%. Unemployment is now a half-point higher than a year ago (when it was 3.6%). Most other measures of labor market activity showed little change – indeed, the labor force participation rate ticked up a bit (to 62.6%), and it has been roughly flat for a year now. But the number of workers who have been unemployed for 6 months or more is also ticking up (to 1.5 million), which is another sign of workers not finding their preferred jobs. This has been especially true for new college graduates recently.
Overall, these numbers suggest a job market that is still quite strong but gradually cooling. They are consistent with other recent reports, such as one earlier this week that showed the job vacancy rate remaining under 5% (well below the rate of over 7% at its peak). Last month’s very hot job report numbers turned out to be just a blip.
As the Federal Reserve considers when inflation has cooled enough to start lowering interest rates, this report will be viewed as a modest step in the right direction. In other words, I doubt it will be enough to move the Fed quickly to lower rates; but these numbers will help get us there, if they can be sustained over the next few months.