The U.S. Bureau of Labor Statistics unveiled the jobs report for June 2023 today, illustrating a slowdown in job creation. The U.S. economy added 209,000 jobs, falling short of economists’ predictions and exhibiting a slackened pace compared to the previous month. However, the unemployment rate dipped to 3.6%, the lowest since March 2020, indicating steady recovery in the labor market.
Sector-Specific Highlights
Most of the job gains in June were driven by the health care, construction, and professional and business services sectors, which added 41,000, 23,000, and 21,000 jobs, respectively. The leisure and hospitality sector, which had been leading the recovery from the pandemic-induced recession, lagged with only 21,000 new jobs, remaining below its pre-pandemic level.
Contrarily, the retail and transportation and warehousing sectors lost jobs in June. The public sector marked its contribution to job growth by adding 60,000 positions, primarily within state and local governments. These jobs, however, are more susceptible to volatility and less impacted by the Federal Reserve’s monetary policy.
Wage Growth and Inflation Concerns
The average hourly earnings in June rose by 12 cents to $33.58, driving the annual wage growth rate to 4.4%. This exceeded the Fed’s target of 3.5% or lower, intensifying concerns about potential inflationary pressures. This might incite the central bank to renew its interest rate hikes later this month.
Analysts’ Take: A Mixed Bag
Analysts and investors received the June jobs report with mixed sentiments. On the positive side, it signified the persistence of labor market recovery despite challenges such as inflation, high interest rates, and looming recession fears. However, the downside was reflected in the cooling job growth rate and struggles in certain sectors to fill their vacancies.
The Fed, which paused its rate hiking cycle in June after increasing its benchmark rate four times in 2022, is likely to scrutinize the labor market data closely in the coming months to calibrate its next policy move. The goal is to attain a soft landing for the economy, a delicate balancing act between curbing inflation without triggering a recession. The slowdown in job creation revealed by the June report could therefore play a crucial role in the upcoming policy decisions of the Fed.
