America’s employers delivered another healthy month of hiring in June, adding 206,000 jobs and once again displaying the U.S. economy’s ability to withstand continually high interest rates.
Last month’s job growth did mark a pullback from 218,000 in May. But it was still a strong gain, reflecting the resilience of America’s consumer-driven economy, which is slowing but still growing steadily.
Still, Friday’s report from the Labor Department contained some signs of a slowing job market. The unemployment rate ticked up from 4% to 4.1%, a still-low number but the highest rate since November 2021. The rate rose in large part because 277,000 people began looking for work in June, and not all of them found jobs right away.
The government also sharply revised its estimate of job growth for April and May by a combined 111,000. And it said average hourly pay rose just 0.3% from May and 3.9% from June 2023. The year-over-year figure was the smallest such increase since June 2021 and will likely be welcomed by the Federal Reserve in its drive to fully conquer inflation.
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The state of the economy is weighing heavily on voters’ minds as the presidential campaign intensifies. Despite consistent hiring, relatively few layoffs and gradually cooling inflation, many Americans have been exasperated by still-high prices and assign blame to President Joe Biden.
Economists have been repeatedly predicting that the job market would lose momentum in the face of high interest rates engineered by the Fed, only to see the hiring gains show unexpected strength. Still, there are signs of an economic slowdown in the face of the Fed’s series of interest rate hikes. The U.S. gross domestic product — the total output of goods and services — grew at a lethargic annual pace of 1.4% from January through March, the slowest quarterly pace in nearly two years.
Consumer spending, which accounts for about 70% of all U.S. economic activity and which has powered the expansion the past three years, rose at just a 1.5% pace last quarter after growing more than 3% in each of the previous two quarters. In addition, the number of advertised job openings has declined steadily since peaking at a record 12.2 million in March 2022.
Still, while employers might not be hiring so aggressively after having struggled to fill jobs the past two years, they aren’t cutting many, either. Most workers are enjoying an unusual level of job security.
During 2022 and 2023, the Fed raised its benchmark interest rate 11 times to try to conquer the worst streak of inflation in four decades, lifting its key rate to its highest point in 23 years. The punishingly higher borrowing rates that resulted, for consumers and businesses, were widely expected to trigger a recession. They didn’t. The economy and the job market instead have shown surprising resilience.
Meanwhile, inflation has steadily declined from a 9.1% peak in 2022 to 3.3%. In remarks this week at a conference in Portugal, Fed Chair Jerome Powell noted that price increases in the United States were slowing again after higher readings earlier this year. But, he cautioned, further evidence that inflation is moving toward the Fed’s 2% target level would be needed before the policymakers would cut rates.
