U.S. Unemployment Rate Holds Steady at 3.6%
U.S. employers created more jobs in June that was forecast, while the unemployment rate stood at a low of five years. These numbers suggest that the hiring need is outpacing any concerns regarding the economic outlook.
According to a Labor Department report, nonfarm payrolls increased by 372,000 in June after a revision of 384,000 reported Friday. From a month prior, the unemployment rate was 3.6%. Average hourly earnings rose 0.3%.
According to a Bloomberg Survey of Economists, the median estimates called for 265,000 more payrolls and for the unemployment rates to stay at 3.6%.
Treasury yields soared and U.S. stock markets fell, while the dollar index gained because of increased bets by investors on Federal Reserve interest rate hikes. From 93%, swaps traders raised to around 96% their probability that the Fed would raise interest rates by 75 basis point this month.
A solid month of job growth highlights yet again the stark contrast between the economic woes of many and the strength of the economy. The drumbeat of a recession is growing louder, and decades-high inflation is eroding Americans’ paychecks and weighing on consumer spending.
Although a few companies announced plans to reduce staffing in June, they have mainly been concentrated in the technology and sensitive interest rate sectors such as housing. The Fed is aggressively raising borrowing costs in an effort to control inflation. Some businesses complain that they are still experiencing worker shortages as well as inability fill the millions of unfilled positions.
The labor force participation rate—the share of the population that is working or looking for work—slipped to 62.2%, and the rate for workers ages 25-54 declined to a four-month low of 82.3%. About half a million Americans are now not working, which is the highest point in this year’s history.
Friday’s report showed that average hourly earnings climbed by a still-elevated 5.1% from a year earlier after an upwardly revised 5.3% gain in May.
Employers have been increasing wages for months to retain and attract workers. However, the overall trend is towards lower pay than rapidly rising prices. While the Fed would welcome a cooling in wage pressures as they seek to limit inflation, a marked slowing in earnings at a time when prices are still extremely high would further curb consumers’ ability to keep spending.
The current level of inflation is at an all-time high, with broad-based effects. Costs have ballooned at grocery stores and gas stations, contributing to President Joe Biden’s dismal approval ratings just months before the November mid-term elections. Although the Fed has pledged to fight inflation, there are increasing concerns about the central bank’s ability to tip the economy back into recession.
—Assisting Chris Middleton and Liz Capo McCormick.
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