The U.S. economy created 209,000 new jobs in June, down from a downwardly revised 306,000 in May, according to the Bureau of Labor Statistics (BLS). This also came in below the consensus estimate of 225,000 and represented the lowest level of job creation of President Joe Biden’s time in the White House.
Employment growth has averaged 278,000 per month in the first six months of 2023, lower than the 399,000 average in the same span a year ago.
The unemployment rate slipped to 3.6 percent, down from 3.7 percent, and matched economists’ expectations.
BLS noted that the change in total non-farm payroll employment levels for April and May were revised down by 77,000 and 33,000, respectively.
Average hourly earnings remained unchanged at a higher-than-expected 4.4 percent year-over-year. On a month-over-month basis, average hourly earnings rose 0.4 percent to $33.58. Average weekly hours inched higher from 34.3 to 34.4.
Job gains were led by government (60,000), health care (41,000), social assistance (24,000), construction (23,000), and professional and business services (21,000). Retail trade lost 11,000 workers, while transportation and warehousing shed 7,000 employees. Manufacturing payrolls increased by 7,000.
The number of people working two or more jobs rose to 7.995 million, up from 7.762 million in the previous month. The number of people working part-time for economic reasons surged by 452,000 to 4.2 million. The number of long-term employed was flat at 1.1 million and represented 18.5 percent of the total unemployed.
“On the heels of May’s blockbuster gains, today’s jobs report finally reflects the slower growth forecasted since early 2023 and a general return to market norms,” said Cody Harker, the head of data and insights of recruitment marketing firm Bayard Advertising.
Stocks were flat in pre-market trading following the June jobs report.
The U.S. Treasury market was mixed. After topping 5 percent for the first time since the global financial crisis on July 6, the 2-year yield tumbled more than 3 basis points to around 4.97 percent. The benchmark 10-year yield picked up a little more than 1 basis point to nearly 4.06 percent.
“With everything that’s been thrown at the economy, it is remarkable that jobs creation has been as solid as it has been, and that the nation’s unemployment rate remains so low. But it has not been without pain, given surging job cuts,” said Mark Hamrick, the senior economic analyst at Bankrate, in a note.
Labor Data
Heading into the NFP report, there were other labor data suggesting that conditions remain tight, more than one year after the Federal Reserve started raising interest rates.
The most notable development was the ADP Research Institute’s National Employment Report. It highlighted that private businesses added 497,000 new jobs in June, higher than the market forecast of 228,000.
ADP economist Nela Richardson noted that much of the gains were concentrated in consumer-facing industries, including leisure and hospitality (232,000) and education and health care (74,000).
This was supported by the Institute for Supply Management’s (ISM) Services Purchasing Managers’ Index (PMI), a barometer of the services sector. The employment sub-index returned to expansion territory in June (53.1) after slipping into contraction (49.2) in May.
Layoffs by U.S. employers were much lower in May. According to Challenger, Gray & Christmas, Inc., U.S.-based companies announced 40,709 job cuts in June, the lowest reading since October 2022. In the first six months of 2023, there has been a total of 458,209 layoffs, the highest first-half total since 2020. The trend has been led by technology (141,156), retail (48,212), and finance (39,768).
“The drop in cuts is not unusual for the summer months. In fact, June is historically the slowest month on average for announcements. It is also possible that the deep job losses predicted due to inflation and interest rates will not come to pass, particularly as the Fed holds rates,” said Andrew Challenger, senior vice president at Challenger, Gray & Christmas Inc, in a statement.
The number of job vacancies slipped below 10 million in May. BLS data show that job openings dropped by 496,000, down from 10.32 million in April. Despite the sharp decline, levels remained higher than before the coronavirus pandemic, suggesting that the labor market continues to be extremely tight.
Second Half of 2023
A chorus of economists had warned that U.S. job creation would be flat by the halfway point.
Mark Zandi, the chief economist of Moody’s Analytics, had warned in December 2022 that average monthly employment gains would be 76,000 in 2023 and nearly flatlining by mid-year.
Many labor estimates have been incorrect this year and, according to Peter Earle, an economist at the American Institute for Economic Research (AIER), this would lead to one conclusion that “our employment forecasts have suddenly become hugely, systematically wrong.”
“Fed interest rate hikes are either acting with a longer lag than usual or having little effect at all on slowing the economy down,” Mr. Earle told The Epoch Times.
As the national labor market remains solid, this gives the U.S. central bank further ammunition to raise interest rates as early as the July Federal Open Market Committee (FOMC) policy meeting.
The futures market is already anticipating a quarter-point hike at this month’s meeting. But it remains unclear as to when the Fed could pull the trigger on another 25-basis-point increase. Fed Chair Jerome Powell refrained from dismissing consecutive meeting rate hikes.
“We should expect another 25-basis-point hike from the Fed in a few weeks,” Mr. Earle said.
But the plight of the U.S. economy through the end of this year “remains a question,” Mr. Hamrick noted.
“If the inflation-fighting Fed feels compelled to raise interest rates further, as it has recently signaled, risks of economic contraction remain, or even grow,” he said.
From The Epoch Times