News wire — U.S. employment increased solidly in June, but government and healthcare services hiring made up about three-quarters of the payrolls gain and the unemployment rate hit a 2-1/2-year high of 4.1%, pointing to a slackening labour market that keeps the Federal Reserve on course to start cutting interest rates soon.
The Labour Department’s closely watched employment report on Friday also showed the economy created 111,000 fewer jobs in April and May than previously estimated, suggesting the trend in payrolls growth was slowing.
Annual wages increased at the slowest pace in three years amid an expanding labor pool, adding to the flashing warning signals in the jobs market. About 277,000 people joined the labor force, accounting for the increase in the jobless rate from 4.0% in May to the highest level since November 2021.
When added to the moderation in prices in May, the report could boost Fed policymakers’ confidence in the inflation outlook after the disinflationary trend was disrupted in the first quarter. Financial markets expect the U.S. central bank, which aggressively tightened monetary policy in 2022 and 2023, to start its easing cycle in September.
“We now have definitive evidence of labour market cooling with a somewhat alarming rise in the unemployment rate in recent months that should give policymakers ‘more confidence’ that consumer inflation will soon return to the 2.0% target on a sustainable basis,” said Scott Anderson, chief U.S. economist at BMO Capital Markets.
Nonfarm payrolls increased by 206,000 jobs last month, lifted by government hiring, the Labour Department’s Bureau of Labour Statistics said. Economists polled by Reuters had forecast payrolls would increase by 190,000 last month, with the unemployment rate unchanged at 4.0%.
Job growth has averaged about 222,000 per month in the first half of this year. Analysts estimate the economy needs to create between 180,000 and 200,000 jobs per month to keep up with growth in the working-age population, taking into account a recent surge in immigration.
A lagging measure of employment, the Quarterly Census of Employment and Wages, QCEW, has suggested a much slower pace of job growth through the fourth quarter of 2023 than that of the payrolls data.
- Reuters
