The Labor Department reported that the June jobs report did not meet expectations, which is in contrast to recent positive readings of the employment market.
Interestingly, this underperformance could offer hope to the Federal Reserve if it signifies the start of a downward trend in the labor market. Adding to this narrative, the May figure was revised downward from 339,000 to 306,000.
In May, the unemployment rate decreased from 3.7% to 3.6%.
Dave Gilbertson, a labor economist at UKG, commented on the job growth, stating that although it may not be as impressive as May’s numbers, it is actually a positive sign. He attributed the decrease in job growth to earlier-than-usual summer hiring, which resulted in significant growth in May.
Gilbertson expressed confidence in the labor market’s foundation and highlighted UKG’s workforce activity data, which indicates ongoing strength and resilience. He mentioned consistent gains since the fall of 2021.
Other recent private data on the job market has been stronger than expected, setting analysts up for a potentially higher number.
Julia Pollak, chief economist at ZipRecruiter, acknowledged that while the labor market has made significant progress, certain industries are still below pre-pandemic employment levels. She emphasized the potential for further growth, particularly among small businesses and state and local governments, who can now afford to hire workers they couldn’t bring onboard a year ago.
Government, health care, social assistance, and construction were the sectors that experienced the strongest gains in June. These industries have faced difficulties in finding workers and have been slower to recover.
The June jobs report follows a positive hiring survey by private payroll firm ADP, which showed 497,000 jobs created, primarily in the leisure and hospitality sector.
Additionally, the government’s May report on job openings indicated a slight decrease from the previous month.
Rachel Sederberg, Senior Economist at Lightcast, noted that job openings are gradually declining without significant increases in layoffs. This combination suggests that the Federal Reserve may achieve the desired “soft landing” where the economy cools down to curb inflation without major job losses.
A positive aspect of recent labor market data is the decline in year-over-year wage growth, which coincides with receding inflation. This trend has left workers slightly ahead in terms of purchasing power.
However, some economists believe that the optimistic outlook for jobs may soon change, especially if the Federal Reserve proceeds with its campaign of interest rate hikes.
Dan North, Chief Economist for North America at Allianz Trade, pointed out that despite the strong headline number, there are underlying issues in the labor market. The year-over-year job growth rate has been steadily declining, dropping from 5.2% in February 2022 to around 2.6% in May.