US employers added 206,000 jobs in June as economy strengthens

WASHINGTON, D.C.: In June, U.S. employers added a notable 206,000 jobs, showcasing the economy’s resilience despite high interest rates.

Though slightly down from May’s 218,000, this hiring surge indicates ongoing economic strength driven by consumer spending.

However, the Labor Department’s report revealed signs of a cooling job market. The unemployment rate rose slightly from four percent to 4.1 percent, the highest since November 2021, largely due to 277,000 new job seekers entering the market.

Many did not find employment immediately. Additionally, job growth estimates for April and May were revised down by 111,000 combined, and average hourly pay only increased by 0.3 percent from May, marking the smallest annual rise since June 2021 at 3.9 percent. This modest pay growth aligns with the Federal Reserve’s efforts to curb inflation, with many economists predicting a rate cut in September.

Notably, the job gains were concentrated in government roles and healthcare and social assistance, sectors that do not fully reflect the economy’s core strength. Job growth from April to June averaged 177,000 per month, the lowest since January 2021, but still a solid figure.

"Both May and June hiring was above 200,000 even after revisions, and the trajectory looks stable," said Eric Winograd, U.S. economist at AllianceBernstein. "The best available evidence is that the labor market remains strong and that any deceleration remains modest."

The state of the economy is a significant concern for voters as the presidential campaign heats up. Despite consistent hiring, minimal layoffs, and cooling inflation, many Americans remain frustrated by high prices, often blaming President Joe Biden.

The Federal Reserve’s series of rate hikes aimed at controlling inflation have shown mixed results. The U.S. GDP grew at an annual rate of 1.4 percent from January to March, the slowest in nearly two years, and consumer spending, which drives 70 percent of economic activity, rose by only 1.5 percent last quarter. Job openings have also declined since peaking in March 2022.

Despite the slowdown in hiring, layoffs remain low, providing workers with a sense of job security. Hal Lawton, CEO of Tractor Supply, highlighted ongoing pressure to increase wages due to high living costs. His company, based in Brentwood, Tennessee, pays workers over US$16 per hour on average and continues to feel the pinch of the tight labor market.

"You have got a tight labor market, and frontline workers are feeling the pinch of their budgets," Lawton said. "They are still out there looking for those wage increases."

The Fed’s interest rate hikes over the past two years, the most aggressive in decades, have not led to the expected recession. Instead, the economy and job market have shown remarkable resilience.

Inflation has decreased from a peak of 9.1 percent in 2022 to 3.3 percent, with Fed Chair Jerome Powell noting recent slowdowns in price increases. However, he emphasized that further evidence of progress toward the Fed’s two percent inflation target is needed before considering rate cuts.

Chris Thomas, an engineering manager in Christiansburg, Virginia, experienced the changed job market firsthand. After being laid off from a tech startup in April, his job search took nearly three months, compared to just one month in 2021 when the tech industry was booming. "This is a very, very different job market than the one we had three years ago,’’ he said.