U.S. job growth slowed more than expected in June after surging in the prior month, but labor market conditions remain tight, with the unemployment rate retreating from a seven-month high and fairly strong wage gains continuing.
Nonfarm payrolls increased by 209,000 jobs last month, the Labor Department said in its closely watched employment report on Friday. Data for May was revised lower to show payrolls rising 306,000 instead of 339,000 as previously reported.
Though job growth is slowing, the labor market remains unbowed despite the Federal Reserve delivering 500 basis points worth of rate hikes since March 2022 when it embarked on its fastest monetary policy tightening campaign in more than 40 years. For now, it is helping the economy to defy economists’ predictions of a recession.
Annual wage growth remains too high to be consistent with the Fed’s 2% inflation target. The U.S. central bank is almost certain to resume raising interest rates later this month as signaled by Fed Chair Jerome Powell, after pausing in June.
Companies are also hoarding workers, a legacy of the dire labor shortages experienced as the economy rebounded from the COVID-19 downturn in 2021 and early 2022.
But some economists argued that worker hoarding was masking weakness in the economy, pointing to worker productivity, which slumped in the first quarter. They also noted that while gross domestic product, the traditional measure of economic growth, was solid in the January-March quarter, an alternative gauge, gross domestic income, has contracted for two straight quarters.
Though businesses are content for now to continue hoarding workers, that could change once slowing consumer spending starts to erode profits, the economists said, predicting major layoffs.
There are also concerns that the slowdown in wage growth, driven by the loss of high-paying technology and finance jobs among others, portends slower consumer spending, the main anchor of the economy.
