June created more jobs than expected complicating the debate about an economic slowdown, according to the Bureau of Labor Statistics…(BLS)
- Total nonfarm payroll employment rose by 372,000 and the unemployment rate remained at 3.6% in June.
- Economists had projected a smaller increase of 270,000.
NOTE: The economy is now just 524,000 jobs short of a full recovery from the pandemic job losses.
The big jump in job creation was thanks to 74,000 new jobs in the professional and business services sector followed by leisure and hospitality which saw 67,000 new jobs, health care (+57k), and transportation and warehousing (+36k).
- NOTE: Employment showed little change over the month in other major industries, including construction, retail trade, financial activities, other services, and government.
Earnings continue to rise, but at a much slower pace than inflation. Average hourly wages were up 0.3% for the month to $32.08, this 5.1% higher than the same time one year ago.
- REMINDER: May’s Consumer Price Index showed prices were up 1.0% for the month and 8.6% year-over-year.
CORRECTION: April’s nonfarm payroll total was revised down by 68,000 jobs and May saw a smaller downward revision of 6,000 jobs.
The labor market has been the one bright spot in the economy in the first six months of the year. The S&P 500 is almost in bear market territory, inflation is at a 40-year high, and consumer confidence has fallen to a 16-month low which appears to be impacting retail spending. However, the labor market has continued to remain robust. The economy has now created 2.2 million jobs and the latest JOLTS report showed the economy has 11 million job openings at the start of June. The continued strength of the jobs market is not only complicating the debate on main street and Wall Street but also in Washington.
The big takeaway after the jobs report seemed to be the impact it has on the recession debate. How can we be in a recession if we are creating almost 400k jobs a month?
- ADAM OZIMEK: Chief economist at Economic Innovation Group “Economy added 372k jobs in June, beating consensus. The labor market is not even remotely suggesting recession.”
- JOSEPH BUSUELAS: Chief economist at RSM, “An economy that is producing jobs at this clip-375K three month average pace- is not one that is in recession. Full stop.”
Jerome Powell has made it very clear that the Federal Reserve plans to stay the course with rate hikes to get inflation under control. However, with a falling stock market and consumer confidence, some have wondered if The Fed might reconsider future rate hikes. However, it is important to remember that The Fed has two mandates inflation and unemployment. If the labor market continues to remain extremely tight the Fed literally has no reason to change course. Neil Irwin, of Axios, tweeted “Unless something very surprising happens with CPI next week and/or in geopolitics, seems like another 75bps rate hike is a sure thing at the end of the month.”