The U.S. economy created a higher-than-expected 208,000 new jobs in June while the unemployment rate ticked up, offering a mixed assessment of the current labor market at a time when the broader economy is showing signs of cooling down.
Last month, the unemployment rate ticked up to 4.1 percent, up from 4 percent in May. The market had penciled in a reading of 4 percent.
Average hourly earnings eased to 3.9 percent year-over-year, down from 4.1 percent. This was in line with economists’ expectations. On a monthly basis, average hourly earnings rose 0.3 percent, down from 0.4 percent, which also matched forecasts.
The labor force participation rate edged up to 62.6 percent, from 62.5 percent. Average weekly hours were unchanged at 34.3.
The government was the top job creator last month, adding 70,000 new positions. This was followed by health care (49,000), social assistance (34,000), and construction (27,000).
Job losses were centered on professional and business services (negative 17,000), retail (negative 9,000), and manufacturing (negative 8,000).
Full-time positions declined by 28,000, while part-time workers increased by 50,000.
The number of people working two or more jobs dipped to 8.34 million. In addition, the number of long-term unemployed surged by 166,000 to 1.5 million.
Moreover, the divergence between U.S.- and foreign-born workers persisted last month.
From June 2023 to June 2024, jobs for foreign-born workers increased by more than 1.1 million. Employment opportunities for native-born workers fell by nearly 1 million in this span.
Market Reaction
The U.S. financial markets were little changed following the employment data, with the leading benchmark indexes recording modest gains before the opening bell.Treasury yields were mostly in the red as the benchmark 10-year yield tumbled to 4.31 percent. The 2-year yield fell below 4.65 percent, while the 30-year bond slid to underneath 4.5 percent.
The U.S. Dollar Index (DXY), a gauge of the buck against a basket of currencies, declined below 104.90 after the monthly jobs report.
As the jobs arena shows signs of weakening, market watchers anticipate that this could further support the case for the Federal Reserve to cut interest rates.
“Given the downward revisions to previous job estimates combined with a slight increase in the unemployment rate to 4.1 percent, the labor market appears to be weakening,” said Bryce Doty, the senior vice president and senior portfolio manager at Sit Investment Associates, in a note. “We expect yields to move lower as this report keeps the Fed on schedule to cut rates this year. Our base case is a 50 bps cut after the election.”
Mark Hamrick, the senior economic analyst at Bankrate, argued that this was the type of report the Fed would want to see.
“With the Federal Reserve seeing inflation data in the statistical neighborhood of where it wants it to be, it is expected to cut interest rates in September,” he stated in a report. “If the job market continues to cool and inflation allows, the central bank will shift some of its attention away from the stable prices part of its mandate to increasingly focus on the other issue which is maximum employment.”
Fed officials have insisted that they will continue to wait for more evidence that inflation is heading toward its 2 percent target before pulling the trigger on a rate reduction.
According to the CME FedWatch Tool, investors are penciling in the first rate cut at the September policy meeting. Traders are also split on whether the central bank will cut rates once or twice before the year is finished.
The updated June Summary of Economic Projections revealed that monetary policymakers only anticipate one quarter-point rate decrease by the year’s end, lowering the median policy rate to 5.1 percent.
Jeff Klingelhofer, the co-head of investments at Thornburg Investment Management, thinks the jobs report means markets can move on from the Fed and concentrate on the economy.
A Flurry of Labor Data
Heading into the Fourth of July holiday, there was plenty of labor market data to sift through.Most of the increases in job vacancies were concentrated in government (154,000), followed by durable goods manufacturing (97,000).
Additionally, April job openings were revised down to 7.919 million, down from the initial estimate of 8.01 million.
Job quits were little changed at 3.459 million, federal agency data showed.
The payroll processor also found that year-over-year pay gains for job changers dropped for the second consecutive month while pay for job stayers remained at 5 percent for the third straight month.
“Job growth has been solid, but not broad-based,” said Nela Richardson, the chief economist at ADP. “Had it not been for a rebound in hiring in leisure and hospitality, June would have been a downbeat month.
“June is typically a low month for job cut announcements, as most companies are midyear or at the end of their fiscal years. The months following fiscal year ends tend to have a spike in cuts, as those plans are implemented,” said Andrew Challenger, Senior Vice President and workplace expert for Challenger, Gray & Christmas, Inc.
“Over the last decade, job cuts have primarily been announced during the first half of the year. Prior to 2013, major announcements would bookend the year.”
Continuing jobless claims edged up to 1.858 million, and the four-week average, which strips the week-to-week volatility, climbed to 238,500.
