The June jobs report underperformed for a change, standing in contrast to other recent readings of the employment market, the Labor Department reported on Friday.
Paradoxically, the report may give hope to the Federal Reserve if it marks the beginning of a downward trend for the labor market. Furthering that narrative, the May number was revised down to 306,000 from the prior 339,000 estimate.
The unemployment rate, meanwhile, dipped to 3.6% from 3.7% in May.
“This level of job growth might not blow the doors off, compared to May, and that’s good,” says Dave Gilbertson, labor economist at UKG. “There is no cause for alarm over this decrease. Summer hiring started earlier than usual this year, and as a result we saw a remarkable level of growth reflected in May’s report.”
“Fundamentally, I’m not seeing any cracks in the foundation of the labor market,” Gilbertson adds. “In fact, UKG’s workforce activity data – as a more real-time gauge of what’s happening in the labor market – shows more strength and resilience than today’s jobs report might suggest. We continue to see the most consistent gains since the fall of 2021.”
Other private data on the job market has been stronger of late, prepping analysts for a number above expectations.
Political Cartoons on the Economy
Julia Pollak, chief economist at ZipRecruiter, says that while the labor market has recovered significantly, some industries still have employment below pre-pandemic levels.
“There’s a lot of room for growth,” Pollak says, adding that small businesses and state and local governments are now able to hire workers who they were priced out of bringing onboard a year ago.
“Now that the labor supply has come back, they’re playing catch-up,” she adds.
Among industries, gains were strongest in June for workers in government, health care, social assistance and construction. These are sectors that have had a hard time recently finding workers and are often late to recover.
The June jobs report follows Thursday’s blockbuster hiring survey from private payroll firm ADP that showed 497,000 jobs created, well above forecasts and heavily dominated by employment in the leisure and hospitality sector.
And it comes a day after the government’s May report on job openings showed a slight downward tick to 9.8 million positions from 10.1 million a month earlier.
“Job openings are coming down gradually, without major increases in layoffs,” said Lightcast Senior Economist Rachel Sederberg. “The combination suggests that the Federal Reserve is on track for the “soft landing” they’ve been hoping for, where the economy cools enough to slow down inflation but without resulting in major job losses.”
One bright spot in the recent labor market data has been the decline in year-over-year wage growth. That has occurred as inflation also has receded, leaving workers slightly ahead of the price increases.
“The wage increases of the last three months, they’ve outpaced inflation but they could be plateauing,” says Geno Cutolo, head of Adecco North America.
Still, some economists believe the rosy jobs picture may well come to an end with a thud sometime soon – especially if the Fed picks up its campaign of interest rate hikes.
“Despite the strong headline number, there are some cracks forming in the labor market under the surface,” says Dan North, chief economist for North America at Allianz Trade. “The (year-over-year) job growth rate has been steadily falling from 5.2% in February 2022 to around 2.6% in May.”