Labor Market Cools as U.S. Employers Added 209,000 Jobs in June
The U.S. Bureau of Labor Statistics (BLS) found in its June jobs report that U.S. employers added 209,000 nonfarm jobs in June, below the Dow Jones’ estimate of a net gain of 225,000 jobs. This is the first time in 15 months that reported nonfarm jobs have not met or exceeded Wall Street’s expectations. June’s number of added jobs was nearly 100,000 below May’s revised gains of 306,000. June’s job growth is the lowest monthly gain since December 2020.
Despite June’s growth falling below expectations, job growth has remained positive for 30 consecutive months. The largest gains were in government and health care, which added 60,000 and 41,000 jobs, respectively. Overall, the government sector has added an overage of 63,000 jobs per month in 2023, more than twice 2022’s monthly average. Leisure and hospitality, which has had the strongest job growth over the past three years, added only 21,000 jobs. This sector has cooled, displaying only modest gains for the past three months.
The unemployment rate decreased from 3.7% in May to 3.6% in June. Experts expected the unemployment rate to drop to 3.6% in June. The number of unemployed individuals changed little, dropping from 6.1 million in May to 6 million in June.
The labor force participation rate was unchanged at 62.6% for the fourth consecutive month, while the employment-population ratio remained at 60.3%. A larger labor supply helps ease a tight labor market and puts downward pressure on wages since there’s less competition among employers for candidates.
Average hourly earnings, a key inflation barometer, rose 0.4% from the previous month, which was slightly stronger than expected, and increased to a 4.4% gain over the past year.
Employer Takeaways
There had been expectations that this month’s BLS report would be much higher than anticipated due to a recent Automatic Data Processing report showing growth in private sector jobs of 497,000 in June. However, June’s jobs report suggests that labor market conditions may finally be beginning to ease. Despite the unexpected cooling of the job market, June’s job growth still outpaces the pre-COVID-19-pandemic average, indicating that the labor market remains strong from a historical perspective. The Federal Reserve (Fed) has tried to cool the labor market with 10 consecutive rate increases. Although the labor market initially seemed resistant to those efforts, June’s report indicates they may be starting to take effect. However, the Fed had hoped their aggressive rate increases would slow the job market, especially in terms of wage gains. The Fed has indicated that more rate hikes are likely in the near future, as the downward trend in wage growth appears to be stalling.
While the labor market appears to be slowing to a more sustainable growth pace, according to June’s jobs report, the labor market continues to be strong compared to pre-pandemic levels. As a result, employers’ struggles to attract and retain workers will likely continue for the foreseeable future. Employers should continue to monitor employment trends to stay competitive in today’s evolving market.
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