The US job market has cooled down again in June. With only 209,000 new jobs added, there is optimism that the economy will achieve that elusive "soft landing" of lower inflation without triggering recession.
The June job gains, released Friday by the Bureau of Labor Statistics, were nearly 100,000 positions below May's stronger-than-expected showing of 306,000 and also fell below economists' expectations for a net gain of 225,000 jobs.
This is the lowest gain in a month since a drop in December 2020. If you exclude the losses that occurred during the first year after the pandemic, June's total was the lowest since December 2019. Despite this, the job growth last month still exceeded the average pre-pandemic.
Rucha Vankudre is a senior economist at labor market analytics firm Lightcast. She told CNN that although the job growth has slowed, she doesn't think it's necessarily bad. In some ways, this is great. We continue to see the soft land that we hope for.
According to the report, the unemployment rate dropped to 3.6% in the last month from 3.7%.
The US has now added jobs to its payroll for 30 consecutive months.
The overall labor force participation was unchanged in June for the fourth month running at 62.6%. However, more women than ever are now working. The participation rate of women aged 25-54 years has reached a new record high, 77.8%.
In a Friday commentary, Becky Frankiewicz said, 'The tug-of-war between the labor and economy continues, but the labor market is strong.'
Cooldown is slow and long
The Federal Reserve's 10 consecutive rate increases have not been able to cool down the economy, especially after nearly half a milion jobs were created in January.
BLS data show that the economy added 1,67 million new jobs in the first half 2023. This is the 12th highest January-June total ever.
The service industries have been responsible for much of the recent job growth as sectors like leisure and hospitality tried to recover from the massive job losses caused by the pandemic, as well as respond to pent up demand from consumers that had suppressed their experiential spending.
Since January, however, the rate of job growth in the leisure and hospitality sector has been slower than it was during the previous two years.
The largest job growth in June was seen by sectors like government, health care, and social assistance: 60,000, 65,200 respectively.
Other industries are also showing signs of slowing. The BLS reported that in June, part-time employment for economic reasons increased by 452,000, to 4.2 millions. This increase was partly due to people who had their hours cut because of slack business conditions.
Rate hikes to come?
Fed officials were hoping that their aggressive rate-hiking would slow down the job market and wage increases, which they view as contributing to inflation.
The report released on Friday showed that the average hourly earning growth was flat at 0.4% compared to the previous month and at 4.4% if viewed over a year.
Vankudre, from Lightcast, said that the Fed would like to see wage growth slow down even more. But it's much better than a year ago, or even the last six months.
Joe Brusuelas is the chief economist at RSM US. He told CNN that in the post-pandemic economic environment, there are some structural and demographic changes that have resulted an economy which is less sensitive to interest rate than it was during previous business cycles. When I see job growth at this rate, my feeling is that the Fed will need to provide additional support in order to cool down overall inflation in core services (excluding housing) in order to achieve price stability.
Brusuelas predicted that the Fed would resume rate hikes during its upcoming meeting to discuss policy later this month, and raise its benchmark rate another quarter-point.
He said, 'We are not at the peak of the interest rate cycle yet, but we are getting there.'