In Washington The Federal Reserve has reason to raise interest rates by another 75 basis points this month as a result of U.S. employers hiring far more workers than anticipated in June and maintaining a steady pace of wage growth.
There was also no evidence of companies cutting back on employee hours, according to the Labor Department’s closely watched employment report released on Friday. For financial reasons, the number of people working part-time dropped to its lowest point in almost 21 years.
Strong job creation assuaged worries about a coming recession and gave rise to optimism that any downturn would be short-lived.
According to Nick Bunker, an economist at Indeed in Washington, “if you’re looking at this report for signs we’re already in a recession, you’re likely to come up blank.” “For the time being, employers continue to hire many workers at higher wages. That is cause for celebration.
According to the survey of businesses, nonfarm payrolls rose by 372,000 jobs in the previous month. More than 350,000 jobs were added for the fourth consecutive month, which brought employment to a level that was 524,000 below that of the pre-pandemic period. All of the jobs lost as a result of the COVID-19 pandemic have been recovered by the private sector, and employment is now 140,000 higher than it was in February 2020. The number of government employees is still down by 664,000.
Reuters polled economists, who predicted an increase in jobs of 268,000, with ranges from 90,000 to 400,000. The professional and business services sector, which added 74,000 jobs in June, was the main driver of the broad increase. Payrolls for leisure and hospitality increased by 67,000 jobs. But the number of people employed in the sector has decreased by 1.3 million since February 2020.
The healthcare, information, transportation, and warehousing sectors all saw significant payroll growth as well. Manufacturing has gained 29,000 jobs and replaced every position lost due to the pandemic. Payroll for construction increased by 13,000 positions.
In the first half, the economy produced 2.74 million new jobs. President Joe Biden applauded the significant increases in employment.
In a statement, Biden said that “no nation is better positioned than America to reduce inflation, without giving up all of the economic gains we have made over the last 18 months.”
On Wall Street, stocks declined. In comparison to a currency basket, the dollar decreased. American Treasury yields increased.
Despite a decline in the quarter from January to March’s gross domestic product, the labor market is robust. Most economists anticipate that GDP will have decreased once more in the second quarter after a string of disappointing reports on everything from housing and manufacturing to May’s consumer spending.
However, a second consecutive quarter of GDP contraction would not signal a recession due to the tight labor market.
According to Noah Williams, an adjunct fellow at the Manhattan Institute, “if the U.S. economy is in or about to enter a recession, it would be a recession of a vastly different nature than that of other historical downturns.”
“Decreases in employment have traditionally been a major feature of recessions, usually beginning with a slowdown in hiring by businesses. A widespread slowing of this kind has not yet occurred.
In order to help keep inflation at its target level of 2 percent, the Fed wants to reduce the demand for labor. The largest increase since 1994, the U.S. central bank increased its benchmark overnight interest rate by three-quarters of a percentage point in June. The Fed, which has increased its policy rate by 150 basis points since March, is widely anticipated by the markets to announce another 75-basis-point increase at its meeting later this month.
Next Wednesday’s release of the June inflation report, which is predicted to show a rise in consumer prices, is also anticipated to give policymakers more justification to increase borrowing costs.
After rising by 0.4 percent in May, the average hourly wage increased by 0.3 percent in June. Due to this, the annual growth rate decreased from 5.3 percent in May to 5.1 percent. Despite the slowdown, wage pressures are still strong, with average production worker hourly wages rising by a healthy 0.5 percent. They increased by 6.4% from the previous year.
With nearly two jobs available for every unemployed person at the end of May and 11.3 million job openings overall, wages will keep rising.
The typical work week stayed at 34.5 hours. The household survey, from which the unemployment rate is derived, had conflicting information. For the fourth consecutive month, the unemployment rate remained at 3.6 percent despite 353,000 people, nearly half of whom were women, leaving the labor force. As a result, the labor force participation rate—the percentage of Americans who are working-age and either have a job or are looking for one—fell from 62.3 percent in May to 62.2 percent.
Employment in households fell by 315,000 jobs. But to 3.6 million, the lowest number since August 2001, there were 707,000 fewer people working part-time for economic reasons.
Unemployment as a whole, which takes into account those who want to work but have given up looking and those who work part-time because they can’t find full-time work, fell to 6.7 percent. That was down from 7.1 percent in May and was the lowest level recorded by the government since series tracking began in 1994.