Key Takeaways
- U.S. employers added 209,000 jobs in June, fewer than forecasts, and the unemployment rate fell to 3.6% from 3.7% in May.
- Government had the biggest increase in hiring, while jobs were lost in retail trade.
- Despite the slowdown in employment growth, the gains likely remained too high to prevent more Fed interest rate hikes.
The U.S. economy added fewer jobs than expected in June as the labor market cooled, though possibly not enough to dissuade the Federal Reserve from hiking interest rate hikes at its next meeting later this month.
The Labor Department reported that nonfarm payrolls increased by 209,000 last month, short of forecasts, and the gains for April and May were revised downward. The June unemployment rate fell to 3.6% from 3.7% in May, in line with economist estimates.
Where The Most Jobs Were Created
The sectors with the biggest job gains were government (+60,000), health care (+41,100), social assistance (+24,100), and construction (+23,000). Employment losses were registered in retail trade (-11,200) and transportation and warehousing (-6,900).
Hourly Wages Rose More Than Anticipated
Average hourly earnings were up 0.4% for the month and 4.4% year-over-year. Both were higher than anticipated. The labor force participation rate was 62.6%, the same as in May.
Despite Hiring Slowdown, The Job Market's Resilience Could Mean More Rate Hikes
Vanguard economists Joseph Davis and Andrew Patterson noted that while the pace of hiring cooled, the economy is still adding more jobs than new entrants to the labor market and that wage growth “remains above levels the Fed would be comfortable with” in its inflation fight.
They said nothing in the release “would change our expectation that the Fed has more work to do.”
Mike Fratantoni, chief economist at the Mortgage Bankers Association (MBA), agreed. He explained that job and wage growth are still “well above the pace that would be consistent with the Federal Reserve’s inflation target.” At their meeting this month, he predicts policymakers will boost rates another 25 basis points (bps).