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U.S. employers added 206,000 jobs in June
WASHINGTON (AP) — U.S. employers delivered another healthy month of hiring in June, adding 206,000 jobs and once again demonstrating the U.S. economy’s ability to withstand high interest rates.
Last month’s job growth marked a decline of 218,000 in May. But it was still a solid gain, reflecting the resilience of the consumer-driven U.S. economy, which is slowing but still growing steadily.
Still, Friday’s Labor Department report contained several signs of a slowing labor market. The unemployment rate rose to 4.1% from 4%, still low but the highest rate since November 2021. The rate rose largely because 277,000 people started looking for work in June, and not all of them found jobs right away.
The government also sharply revised down its job growth estimate for April and May by a combined 111,000. And it said average hourly earnings rose just 0.3% from May and 3.9% from June 2023. The year-over-year figure was the smallest such increase since June 2021 and will likely be welcomed by the Federal Reserve in its drive to fully conquer inflation. Most economists think the Fed will start cutting its benchmark rate in September, and the details in Friday’s jobs report did nothing to counter that expectation.
Just two sectors — government and a category that includes health care and social assistance, neither of which captures the underlying strength of the economy — accounted for roughly three-quarters of June’s job growth. Economists also noted that job growth from April to June averaged 177,000, a decent number but still the lowest three-month average since January 2021.
Other economists, while agreeing that the labor market is slowing, suggested it remains resilient.
“Hiring in May and June was above 200,000 even after revisions, and the trajectory appears stable,” said Eric Winograd, U.S. economist at AllianceBernstein. “The best available evidence is that the labor market remains strong and that any slowdown remains modest.”
The state of the economy is weighing heavily on voters’ minds as the presidential campaign heats up. Despite steady hiring, relatively few layoffs and gradually easing inflation, many Americans have grown exasperated with still-high prices and are blaming President Joe Biden.
Economists have repeatedly predicted that the labor market would weaken in the face of the Fed’s projected high rates, only to see hiring gains show continued strength. Still, signs of an economic slowdown have emerged following the Fed’s series of rate hikes. U.S. gross domestic product—the total output of goods and services—grew at a lethargic annual pace of 1.4% from January to March, the slowest quarterly pace in nearly two years.
Consumer spending, which accounts for about 70% of all U.S. economic activity and has driven expansion over the past three years, rose at a rate of just 1.5% last quarter after growing more than 3% in each of the previous two quarters. In addition, the number of job vacancies advertised has been steadily declining since reaching a record peak of 12.2 million in March 2022.
At the same time, while employers may not be hiring as aggressively after struggling to fill positions over the past two years, they’re not cutting many jobs either. Most workers are enjoying an unusual level of job security.
Hal Lawton, CEO of Tractor Supply, a retail chain that serves customers in rural areas, said his company still feels pressure to raise wages. The average hourly pay at Tractor Supply, based in Brentwood, Tennessee, exceeds $16 for workers. And with rent and food prices high, workers are still seeking pay raises.
“You have a tight labor market, and frontline workers are feeling the pinch of their budgets,” Lawton said. “They’re still out there looking for those pay raises.”
During 2022 and 2023, the Fed increased its base interest rate 11 times to try to beat the worst wave of inflation in four decades by raising its benchmark rate to its highest point in 23 years. The resulting punitively higher lending rates for consumers and businesses were widely expected to trigger a recession. They didn’t. The economy and the labor market have instead shown surprising resilience.
However, inflation has been decreasing steadily, a peak of 9.1% in 2022 to 3.3%. Speaking this week at a conference in Portugal, Fed Chairman Jerome Powell noted that price increases in the United States were slowing again after higher readings earlier this year. Powell warned that more evidence that inflation is moving toward the Fed’s 2% target level would be needed before policymakers cut rates.
“This is the kind of report the Federal Reserve wants to see,” said Gus Faucher, chief economist at PNC Financial Services Group. “It looks pretty good. The labor market is not as strong as it was last year at this time. But the labor market at that time was unsustainably strong.”
Chris Thomas, an engineering manager in Christiansburg, Virginia, said he can see firsthand that the job market has lost steam. When Thomas started his job search earlier in 2021, when tech startups were desperate to hire, he got interviews with about a third of the companies he applied to. It took him just a month to find a job.
But after he was laid off in April from a job at a startup, it became clear that the landscape had changed. First, he sought out leads through his network of friends and business associates. No luck. Then he sent out hundreds of resumes for positions he thought he was qualified to fill. He got few responses.
Finally, after a search of almost three months, Thomas landed a job in late June.
“This is a very, very different job market than we had three years ago,” he said.
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AP Retail Writer Anne D’Innocenzio in New York and AP Economics Writer Christopher Rugaber in Washington contributed to this report.