The US Department of Labor released a report on Friday (July 5) showing that the number of new nonfarm jobs added in June was 206,000, slightly exceeding expectations. The unemployment rate rose to 4.1%.
According to data from the Bureau of Labor Statistics, the 206,000 new nonfarm jobs added in June exceeded the Dow Jones forecast of 200,000 but were lower than the 218,000 added in May.
The unexpected increase in the unemployment rate to 4.1%, above the expected 4%, reaching the highest level since October 2021, provides a contradictory signal for Federal Reserve officials to weigh the next steps in monetary policy measures.
In terms of specific industries, government sectors led job growth, adding 70,000 jobs in June, followed by the healthcare industry (49,000), social assistance with an increase of 34,000 jobs, and the construction industry with 27,000 new jobs.
However, several industries experienced job declines, including professional and business services (a decrease of 17,000 jobs) and retail (a decrease of 9,000 jobs).
Average hourly wages, which are closely watched as an inflation indicator, continue to cool off, with a 0.3% month-on-month increase in June and a 3.9% year-on-year increase, marking the smallest annual increase in three years. Wages for production and non-supervisory workers increased by 4%. The average weekly working hours remained stable at 34.3 hours.
Recruitment continues to slow down, coupled with recent easing of inflation, strengthening the bets that Federal Reserve policymakers are likely to cut interest rates as early as September.
In the latest employment report, the Department of Labor significantly revised down the nonfarm job numbers for May from the initial estimate of 272,000 to 218,000, while also lowering the April nonfarm job numbers to 108,000, a reduction of 57,000 from previous estimates.
Bloomberg cited Kathy Jones, Chief Fixed Income Strategist at Charles Schwab, as saying, “The downward revisions of the last two months’ job additions, along with the rise in the unemployment rate, are important data points. Wage growth is also slowing down.”
CNBC quoted David Russell, Director of Global Market Strategies at TradeStation, as saying that the employment report reinforces the reasons for rate cuts.
The report was released as Federal Reserve officials are considering the next steps in monetary policy measures. The Fed meeting minutes released on Wednesday (July 3) showed that Fed officials indicated at the June meeting that while inflation is moving in the right direction, they need to see more favorable data to be more confident that the inflation rate is sustainable towards 2%.