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US labor market adds 206,000 jobs, unemployment rate rises to 4.1%
The U.S. labor market created more jobs than expected in June, while the unemployment rate unexpectedly rose to its highest level since November 2021, another sign that the labor market continues to cool.
Data from the Bureau of Labor Statistics released Friday showed the U.S. economy created 206,000 nonfarm jobs in June, more than the 190,000 economists expected.
The unemployment rate rose to 4.1%, up from 4% the previous month and the highest reading in nearly three years. June’s job additions were a slight decline from May, which saw job gains revised down on Friday to 218,000 from the previous month. 272,000 initially reported last month. Total revisions for April and May showed the U.S. economy created 111,000 fewer jobs than initially reported.
“The June jobs report showed further signs of a cooling in the labor market, with employment growth, including revisions, weaker than expected, the unemployment rate rising and earnings growth slowing,” Nancy Vanden Houten, chief U.S. economist at Oxford Economics, wrote in a note to clients.
The S&P 500 (^GSPC) and Nasdaq Composite (^IXIC) rose after the report, adding to gains after the market traded at record highs earlier this week amidst a series of weaker-than-expected economic data, Including readings on inflation that have the US retreating towards a “disinflationary path” according to Federal Reserve Chairman Jerome Powell.
Read more: How does the labor market affect inflation?
Ahead of Friday’s jobs report, investors were pricing in two interest rate cuts this year, with the first likely coming in September.
According to CME FedWatch ToolInvestors are pricing in a nearly 75% chance of the Fed cutting rates in September. Last month, Fed forecasts suggested a rate cut was likely appropriate this year.
For some, Friday’s report further strengthens the case for Federal Reserve interest rate cuts in the near future.
“Today’s jobs report should firm up expectations for a September rate cut,” Neil Dutta, head of economics at Renaissance Macro, wrote in a note to clients. “Economic conditions are cooling and that makes the tradeoffs different for the Fed… Powell is likely to use July to set a September cut.”
With jobless claims rising and the unemployment rate at its highest level in more than two years while inflation is falling, economists believe the Fed is walking a tightrope in keeping interest rates at their highest levels in more than two decades.
“Given the evident cooling in the labor market over the past year, we see further weakening in the labor market, which is both more concerning and less welcome by the Fed,” Wells Fargo senior economist Sarah House wrote in a note to clients Tuesday.
The story continues
Data released earlier this week also showed signs of a slowdown in the labor market.
On Wednesday, the ADP Research Institute National Employment Report showed 150,000 jobs was added for the private sector in June, a slowdown from the 157,000 job additions in May.
Meanwhile, data from the Department of Labor showed that nearly 1.86 million continuing unemployment insurance claims were filed in the week ending June 29, up from 1.83 million the previous week. That marked the ninth consecutive week that continuing claims have increased.
Elsewhere in Friday’s report, wage growth, a key measure of inflationary pressures, slowed to 3.9% year over year. On a monthly basis, wages rose 0.3%, down from the previous month’s 0.4% gain.
Meanwhile, the labor force participation rate rose to 62.6% from 62.5% the previous month.
The biggest job gains in Friday’s report were in government employment, which added 70,000 jobs in June. At the same time, health care employment added 49,000 jobs, below the average monthly gain of 64,000 over the past 12 months.
Pedestrians and a construction worker walk past a lit American flag in the rain in Times Square on Aug. 22, 2013, in New York City. (Mario Tama/Getty Images) (Mario Tama via Getty Images)
Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
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