WASHINGTON (Reuters) – The U.S. economy added the fewest new jobs in two-and-a-half years in June, but robust wage growth means labor market conditions remain tight. The Federal Reserve is almost certain to resume rate hikes. Later this month.
Friday’s jobs report, which the Labor Department is keeping an eye on, also showed a 110,000 drop in jobs created in April and May, with higher borrowing costs discouraging businesses from continuing to expand their workforce. It has been shown that it is starting to Last month, the number of people working part-time for economic reasons surged, partly because working hours were shortened due to lack of work and the economy.
Nonetheless, the pace of job growth remains strong by historical standards, and this week’s data showing an acceleration in service sector activity suggests the economy is far from the long-anticipated recession. suggesting.
“Employment numbers showed signs of weakness, but the labor market remains strong,” said Sean Snaith, director of the Economic Forecasting Institute at the University of Central Florida. “The Fed’s job is by no means done. We are in a long-running battle with inflation, but today’s report suggests nothing else.”
Nonfarm payrolls rose by 209,000 last month, the smallest increase since December 2020, according to a business survey. Economists polled by Reuters had forecast an increase of 225,000 jobs. It was the first time in 15 months that the jobs report was lower than expected.
Employment growth averaged 278,000 per month in the first half of this year. To keep up with the growing working-age population, the economy will need to create 70,000 to 100,000 jobs each month.
Job growth has been driven by firms hoarding workers, a tragic trend experienced in 2021 and early 2022 as the economy recovered from the COVID-19 pandemic-induced downturn. It is a remnant of a serious labor shortage.
High-wage industries such as technology and finance are laying off workers, while sectors such as leisure, hospitality and local government education lost workers to the pandemic and experienced accelerated retirements. is still catching up.
Government employment increased by 60,000, helped by a 59,000 increase in state and local salaries. Government employment is still 161,000 below pre-pandemic levels.
The increase in private employment was 149,000, also the smallest increase since December 2020. Employment in health care institutions increased by 41,000, reflecting increased employment in hospitals, long-term care, residential care facilities and home health care services.
Employment in the construction industry increased by 23,000. The housing market, which was hit by soaring mortgage rates, is showing signs of recovery. The Fed has raised interest rates by 500 basis points since March 2022, when it embarked on its fastest monetary policy tightening in more than 40 years.
Employment in professional and business services also rose, but temporary jobs, a precursor to future jobs, fell by 12,600. Manufacturing payrolls recovered modestly as the manufacturing sector struggled with slowing demand. Meanwhile, retail jobs fell by 11,200.
Employment in the leisure and hospitality industry increased by 21,000. However, the pace has slowed compared to the first quarter. Demand may be slowing or businesses may be struggling to find workers, as a June survey by the Institute for Supply Management alluded to, which found that some service firms ” We are unable to find qualified candidates for some open positions.”
There were 1.6 job openings for every unemployed person in May, government data showed on Thursday. Leisure and hospitality employment remains 369,000 below pre-pandemic levels.
[1/2]An employee recruitment sign with a QR code in a business window in Arlington, Virginia, USA on April 7, 2023.Reuters/Elizabeth Franz/File Photo
Stocks on Wall Street were mixed. The dollar fell against a basket of currencies and US Treasury prices rose.
significant wage increase
Average hourly wages rose 0.4% after rising by a similar amount in May as workers in some industries remain in short supply. That left June wage growth at just 4.4% annualized, too high to match the Fed’s 2% inflation target.
The average weekly working hours increased from 34.3 hours in May to 34.4 hours. However, it is below the January average of 34.6 hours.
“Even though companies continue to retain and add employees, they are not increasing their hours per week,” said Selcuk Ellen, senior economist at The Conference Board in Washington. “This is consistent with CEOs choosing to keep workers on reduced hours in some cases, rather than laying off workers for fear of future job shortages in an economic slowdown. There is.”
Labor hoarding has helped the economy stave off recession, but at the cost of weak productivity and margins in the first quarter. Economists expect companies to swing their axes as the pressure on profits increases.
Employment rose by 273,000, reversing from a decline of 310,000 in May, according to the household survey, which is the basis of the unemployment rate. This more than makes up for the increase in people entering the labor force.
As a result, the unemployment rate fell to 3.6% in June from a seven-month high of 3.7% in May. The unemployment rate has hovered between 3.4% and 3.7% since March 2022.
However, the number of people in part-time employment for economic reasons increased by 452,000 to 4.2 million. This partly reflects the increase in the number of people whose working hours have been shortened due to sluggish work or business conditions.
The labor force participation rate, the percentage of working-age Americans who have or are looking for work, remained flat for the fourth straight month at 62.6%. However, the participation rate for the 25-54 age group rose to 83.5% from 83.4% in May, the highest level since May 2002.
“Labour demand remains unmatched, but the labor shortage that employers sighed over a year ago is certainly easing to some extent,” said Andrew Flowers, chief labor economist at Upcast. . “This robust labor market is drawing workers from the sidelines.”
Reported by Lucia Mutikani.Editing: Daniel Wallis, Chizu Nomiyama, Andrea Ricci
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