Employers added 372,000 jobs, the Labor Department said Friday, and the unemployment rate, at 3.6 percent, was unchanged from May and near a 50-year low. Washington and Wall Street anxiously awaited the new data after a string of weaker economic indicators. June employment growth beat economists’ forecasts by about 100,000, offering some reassurance that a deeper recession is not underway — at least not yet. But the strength of the report, which also showed stronger-than-expected wage gains, could give the Federal Reserve more room for tougher medicine to curb inflation. Now, all eyes will be watching whether the Fed’s rate hike strategy pushes the country into a painful recession. Employment growth over the past three months averaged 375,000, a steady decline from the monthly pace of 539,000 in the first quarter of this year. Employers have continued to cling to workers in recent months, with initial jobless claims rising only slightly from their low point in March. The private sector has now recovered to its pre-pandemic level of employment – an achievement touted by the White House on Friday – although the level is still below what would be expected without the pandemic. Except for the public sector, no broad industry lost jobs in June on a seasonally adjusted basis. “We’re basically back to where we were before Covid,” said Christian Lundblad, professor of economics at the Kenan-Flagler Business School at the University of North Carolina. “So this doesn’t necessarily look like a dire situation, despite the fact that we are struggling with inflation and economic declines in some other dimensions.” The strong demand for workers is also evident in the 11.3 million jobs that employers opened in May, which remains near record highs and leaves nearly two jobs available for every job seeker. In this equation, any workers laid off as certain sectors come under pressure are more likely to find new jobs quickly. The Labor Department’s broader measure of underutilization of the labor force — which includes part-time workers who want more hours and people who have been discouraged from job hunting — sank to its lowest rate since the household survey took its current form in 1994, a sign that employers are maxing out their existing workforce as hiring remains tough. Employment in service industries led June’s gains, in line with a slowdown in spending on goods as consumers turned to experiences they had to forgo while public health restrictions remained in place. Leisure and hospitality businesses, still covering pre-pandemic employment levels, added 67,000 jobs. Public employment was an exception to the larger trend, with a decline of 9,000 jobs. That was 664,000 jobs below what they were in February 2020. The buoyant labor market was particularly beneficial for historically marginalized groups: The unemployment rate for black Americans fell to 5.8%, nearly double that for whites but the lowest since November 2019.
The state of jobs in the United States
Job gains continue to maintain their impressive pace, easing concerns about an economic slowdown but complicating efforts to fight inflation.
The healthy pace of hiring is in stark contrast to surveys of consumer and business sentiment, which have fallen to alarmingly low levels in recent months. While widespread perceptions of a recession appear to be off base, the rapid job growth in the first half of the year likely won’t continue into the second. High prices weigh on consumer spending. Savings are shrinking. The labor force remains constrained by aging demographics, low levels of immigration, and barriers to work — such as the availability of care for children and older family members — that keep many people on the sidelines. In a related message, the share of people in their prime — ages 25 to 54 — who are either working or looking for work fell in June to 82.3 percent from 82.6 percent, well below the pre-pandemic high of 83. 1%. The report contained indications that Covid-19 remains a lingering concern, with 2.1 million people saying they were unable to work in June because their employer closed or lost business as a result of the pandemic, compared with 1 .8 million in the previous month. Also, as inflation remains high, some people may be withdrawing from the labor market simply because it is too expensive to continue working. That’s the situation facing Megan Petersen, who supports her family of four in Spokane, Washington, with a full-time job in digital marketing and a side business selling jewelry. Her husband worked for the U.S. Postal Service until last week, when he quit to care for their 2-year-old child after the price of gas and child care costs exceeded his wages. “Once benefits and everything comes out of your paycheck, it’s literally less than both of those things combined,” Ms. Petersen said. “That doesn’t make mathematical sense.” Her husband can return to work, she said, when their youngest daughter starts school. But there is no guarantee that a plethora of jobs will be waiting for him. Consultancy Oxford Economics predicts the economy will add an average of only 65,000 jobs a month in 2023. Business leaders report that while some supply chain issues have eased, new orders are slowing. Whenever possible, employers are automating tasks rather than hiring. “Employers are becoming less anxious to fill these jobs as they watch the economy slow,” said Bill Adams, chief economist at Comerica Bank. “I would expect that businesses will likely be slow to fill open positions before they actually advertise.” Wage growth, while strong, moderated in June and was not enough to keep up with prices, meaning those on the lowest incomes may have to choose which essentials to pay for. Heading into the fall, slowdowns are expected first in businesses that are more sensitive to interest rates, such as construction and manufacturing. Andrew Wernick runs Industrial Plywood, a lumber supplier in Reading, Pa., that has raised wages significantly to compete with workers over the past year as demand for frames and cabinets has soared. Now, as rising mortgage rates dampen home sales, he’s not sure if he’ll be able to sustain those new hires through the end of the year. “Many of our clients are still working on backlogs and no new business is coming in the front door,” Mr. Wernick said. “We’re not so quick to let people go if they’re already trained – they’re so hard to replace.” Some industries that were actively hiring — such as those benefiting from strong demand for goods in earlier stages of the pandemic — are facing a shift back to more typical market patterns. For workers who responded to the higher wages offered by desperate employers, this can be painful. Exhibit A is the trucking industry, which attracted thousands of drivers as fares rose and newspaper headlines proclaimed a labor shortage. Kenny Vieth, president of transport data firm ACT Research, said falling freight spending meant there wasn’t enough freight to keep everyone on the road. “Kids poured into the market just as the volume of commodities dropped,” Mr. Vieth said. “Given how quickly the spot market has collapsed, we anticipate that driver capacity will be restored more quickly.” As the past two years have shown, unpredictable headwinds can always arise – a new variant of the coronavirus, another global conflict or a natural disaster that throws supply chains back into turmoil. The variable on most forecasters’ minds, however, is what the Fed’s interest rate policy will do to economic activity. “I think it’s inevitable that we’ll see a slowdown,” said Cailin Birch, the chief U.S. analyst for the Economist Intelligence Unit. “The question is whether it’s a slowdown that’s manageable or whether it turns into a meltdown.”
