The United States slowed hiring but still added 209,000 jobs in June, a sign of the economy’s resilience

U.S. employers cut hiring but still recorded another month of strong gains in June, adding 209,000 jobs, a sign that the economy’s resilience is thwarting the Federal Reserve’s drive to slow growth and inflation. inflation.

The latest evidence of economic strength makes it almost certain that the Fed will resume interest rate hikes later this month after ending a streak of 10 rate hikes that were aimed at reining in high inflation.

The June hiring figure reported by the government on Friday is the smallest in two and a half years. But it still points to a sustainable job market that has produced a historically high number of advertised openings. The unemployment rate fell from 3.7% to 3.6%, near a five-decade low.

Most of the details in the report underscore the sustainability of the labor market. The length of the average workweek has increased slightly, indicating that customer demand is strong enough to keep employees busy. And wage growth has accelerated: hourly wages are up 4.4% from a year ago. Wages are now rising faster than year-on-year inflation, which stood at 4% in May.

The wage data may raise concerns at the Fed, which worries that faster wage gains could perpetuate inflation by leading companies to raise prices to offset their higher labor costs. The Fed wants to see hiring and wage increases slow before stopping its rate hikes.

“It’s kind of a Goldilocks report,” said Julia Coronado, president of MacroPolicy Perspectives, an economic research firm. “It’s a resilient job market – not too hot, not too cool.”

Friday’s data contained evidence of a slowing pace of hiring, which could reassure the Fed that the economy is slowing. Most of the job growth came from state and local governments, healthcare companies and private education, which together added 133,000 jobs. Because these sectors aren’t as reliant on robust consumer spending as the rest of the economy, their hiring gains don’t really reflect growing consumer demand — the main driver of inflation.

Dean Baker, senior economist at the Center for Economic Policy Research, noted that excluding government hiring, private sector job gains totaled 149,000 in June, a pace that does not indicate overheating in the economy. economy that could alarm the Fed.

“It’s hard to say it’s too fast,” Baker said. “It’s pretty much sustainable.”

On Friday, the government also revised down its estimate of job growth for April and May combined by a substantial 110,000, another sign that hiring has slowed from the blistering pace of the last year.

The economy has been beset by high interest rates, high inflation and nagging worries about a possible recession resulting from ever-higher interest rates from the Fed. Even so, many industries continue to add jobs to keep up with consumer spending and restore their workforce to pre-pandemic levels.

The steady pace of hiring and rising wages have allowed consumers to continue spending on services, whether it’s traveling, dining out or attending entertainment events. While economists have repeatedly predicted a recession for later this year or next, a slowdown is unlikely as long as businesses continue to steadily fill jobs.

The Fed raised its key interest rate by 5 percentage points – the fastest pace of rate hikes in four decades. These increases have made mortgages, car loans and other forms of borrowing much more expensive.

Some Fed officials have said they are looking for signs of what they describe as a better balance in the labor market, by which they mean the supply and demand for workers will become more equal. After the economy emerged from the pandemic, the number of available jobs exceeded 10 million, the highest level on record.

The growing demand for labor has coincided with millions of Americans leaving the workforce to retire, avoid COVID, care for loved ones or prepare for new careers. With companies struggling to fill vacancies, many were offering significantly higher wages and better benefits to attract or retain employees.

There has been some progress towards a better alignment of supply and demand: More people have started looking for work in recent months, and most of them have found jobs. As the supply of workers has improved, companies said they are seeing more and more people applying for vacancies. The number of job vacancies fell in May, a sign that demand for workers is gradually cooling, although it remains above pre-pandemic levels.

Sign of a potential slowdown in the labor market, fewer Americans are leaving their jobs to seek new positions. Resignations had skyrocketed after the pandemic. Millions of Americans had sought more meaningful or better-paying jobs, fueling pressure on companies to raise wages to keep employees. In May, about 4 million Americans quit their jobs, up from April’s figure but below last year’s peak of 4.5 million.

Yet other recent reports suggest the economy has continued to expand and the demand for workers remains high. On Thursday, a survey of service providers – including banks, restaurants and shipping companies – found the sector grew at a healthy pace in June and service companies accelerated their hiring compared to may.