U.S. Nonfarm Payrolls Rise by 57,000 in June, Only Half of Forecast

Half the Market Forecast
Expectations for Further Rate Hikes Diminish

U.S. job growth in June was only about half of what the market had expected. Although the unemployment rate declined, this was largely due to an increase in the number of people giving up on job searches or leaving the labor force. With both a slowdown in job creation and a moderation in wage growth confirmed, expectations for additional interest rate hikes by the Federal Reserve have diminished to some extent.

A worker is stocking products at a supermarket located in New York. New York (USA) – Photo by Yoonju Hwang.

On July 2 (local time), the Bureau of Labor Statistics at the U.S. Department of Labor announced that nonfarm payrolls increased by 57,000 in June compared to the previous month. This figure is significantly below the 115,000 increase projected by experts surveyed by Dow Jones. The job gains for April and May were also revised down by 31,000 and 43,000, respectively, reducing the combined total for those two months by 74,000 jobs.

The unemployment rate fell slightly to 4.2%, down from 4.3% in the previous month, and below the market forecast of 4.3%. However, this decline in the unemployment rate cannot be seen solely as an improvement in the labor market. The labor force participation rate dropped to 61.5%, marking its lowest level since March 2021. The Wall Street Journal (WSJ) reported that the labor force shrank by 720,000 between May and June, and analyzed that strict immigration policies and the retirement of baby boomers may have contributed to the reduction in available workers.

By sector, healthcare and social welfare led the increase in employment. According to the Department of Labor, professional and business services added 36,000 jobs, social welfare gained 25,000, and healthcare increased by 22,000. In contrast, employment in the leisure and hospitality sector fell by 61,000 jobs.

The Department of Labor explained this as a result of "weaker-than-usual seasonal hiring." Some economists had expected that the FIFA World Cup, which kicked off in June, would boost employment in the service sector, but the actual data showed the opposite.

Bloomberg News assessed that this slowdown in job growth has put the brakes on a labor market that had shown signs of recovery in recent months. Despite a relatively resilient level of consumer spending in the face of the energy shock caused by the Iran war, the burden of high prices and weakening consumer sentiment have led companies to take a more cautious approach to hiring. The WSJ also reported that the decline in leisure and hospitality employment may reflect a slowdown in spending by low-income consumers and weakened corporate confidence in summer service demand.

Wage growth also remained moderate. In June, the average hourly wage in the private sector rose 0.3% from the previous month to $37.64. Compared to the same month last year, this was an increase of 3.5%. Given that the consumer price index rose 4.2% year-on-year in May, wage growth has failed to keep pace with inflation. This could put pressure on consumer purchasing power.

However, some assessments indicate that it would be an overstatement to say the labor market has sharply deteriorated. According to the WSJ, the U.S. economy added an average of 92,000 jobs per month in the first half of this year. Compared to the average decrease of 8,000 jobs per month in the second half of last year, the job market remains relatively stable. Unemployment benefit claims have also stayed low, suggesting there is still limited evidence of widespread layoffs.

The financial market interpreted these figures as reducing the likelihood of additional rate hikes by the Federal Reserve. Heather Long, Chief Economist at Navy Federal Credit Union, told Bloomberg, "For the Fed, this means the labor market is stable and there is no inflationary pressure coming from jobs," but added, "For ordinary Americans, it is disappointing news. Job opportunities are limited, and inflation is erasing wage gains."

This content was produced with the assistance of AI translation services.