The US labor market added 372,000 jobs in June, a much bigger jump than expected that points to strength in parts of the economy where other data had shown weakness.
Over the past six months, a variety of indicators have been signaling a slowdown in housing and manufacturing, sectors that are sensitive to interest rate hikes. Tech stocks, meanwhile, took a dive with the rest of the market, initiating a round of tech layoffs. But on Friday, the jobs report showed solid job growth across the board, including in all of those sectors.
“The US labor market is defying gravity,” said Becky Frankiewicz, chief commercial officer at Manpower group, a staffing firm. ”Fears of a possible recession stoked by inflation and an aggressive Fed are eclipsed by the simple reality that employers can’t hire fast enough to meet demand.”
The strong jobs report should somewhat quell growing fears of a recession. It shows that while inflation is making Americans cut back on shopping, they are ramping up spending on vacations and other outings. The return to the office, meanwhile, is boosting employment in business services.
In June, the US economy reached the same number of private sector jobs as it had before the pandemic. (The public sector is still 500,000 jobs short as government agencies take longer to bounce back.)
All of this comes on the heels of a strong labor turnover report that showed job openings and quits remaining near record highs, while layoffs stayed at record lows. That lessens the chances of the US tipping into a recession — or at least delays that possibility.
But for the US Federal Reserve, which is struggling to contain inflation without derailing the economic recovery, the robust job picture makes will make it harder to maneuver. Fed chief Jerome Powell has said he wants to see wage growth and job openings slow down in order to reduce overall demand and price increases.
Some signs of the labor market cooling off
In June, average hourly earnings continued to grow, ticking up from $31.98 to $32.08, but at a much slower pace than in previous months. And although the overall unemployment rate remained steady at 3.6%, there are signs it’s getting harder for some workers to find jobs.
July weekly unemployment data from the Census Department also show the labor market may not be as strong as the June job numbers suggest. Because the data for the jobs report was collected in the first two months of June, the most recent uptick in applications for US unemployment insurance isn’t represented in the figures released Friday, said Skanda Amarnath, executive director at Employ America, a labor advocacy and research group.
“We’ve seen…a pretty significant slowing in terms of progress, if not some signs of just gross hiring slowing down quite a bit,” Amarnath said. “Layoff rates aren’t alarming, but we should we should be expecting a slowdown.”