Job seekers attend the JobNewsUSA.com South Florida Job Fair held at Amerant Bank Arena on June 26, 2024 in Sunrise, Florida.
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The US economy again added slightly more jobs than expected in June, although the unemployment rate rose, the Labor Department reported on Friday.
Nonfarm payrolls rose by 206,000 for the month, better than the Dow Jones forecast of 200,000, though less than the downwardly revised gain of 218,000 in May, which was down sharply from the initial estimate of 272,000.
The unemployment rate rose unexpectedly to 4.1%, tied for the highest level since October 2021 and providing a contradictory sign for Federal Reserve officials weighing their next move on monetary policy. The unemployment rate was expected to hold steady at 4%.
“The labor market is bending without breaking yet, which increases the case for rate cuts,” said David Russell, global head of market strategy at TradeStation. “Things are not too hot and not too cold. Goldilocks is here and September is in play.”
The increase in the unemployment rate came as the labor force participation rate, which shows the level of working-age people who are employed or actively looking for a job, rose to 62.6%, up 0.1 percentage point.
A broader unemployment rate, which counts discouraged workers and those holding part-time jobs for economic reasons, remained steady at 7.4%. Household employment, which is used to calculate the unemployment rate, rose by 116,000. The household survey also showed a drop of 28,000 in full-time workers and an increase of 50,000 in part-time workers.
Although job creation in June beat expectations, it was largely due to an increase of 70,000 government jobs. Also, health care, a consistent sector leader, added 49,000, while social assistance contributed 34,000 and construction increased by 27,000.
Several sectors saw declines, including professional and business services (-17,000) and retail sales (-9,000).
On wages, average hourly earnings rose 0.3% for the month and 3.9% from a year earlier, both in line with estimates. The average working week was stable at 34.3 hours.
Stock futures rose after the report while Treasury yields were negative.
In addition to the substantial revision to May’s payroll count, the Bureau of Labor Statistics cut April to just 108,000, a slide of 57,000 from the previous estimate.
Long-term unemployment rose sharply during the month, by 166,000 to 1.5 million, compared with 1.1 million a year earlier. The BLS said the share of the long-term unemployed as a percentage of the total unemployment rate was 22.2%, compared with 18.8% a year earlier.
The unemployment rate for black workers climbed to 6.3%, the highest since March. The rate for Asians jumped a full percentage point to 4.1%, the highest since August 2021.
The report comes as Federal Reserve officials ponder their next moves on monetary policy.
At their most recent meeting, policymakers indicated they need to see more progress on inflation before cutting interest rates, while noting that a strong economy and particularly a solid labor market reduce the urgency to act. sooner, according to minutes released earlier this week.
Despite indications to the contrary, markets are pricing in two rate cuts, assuming quarterly percentage cuts, before the end of 2024. Fed officials at the June meeting penciled in just one cut, saying they should see “additional favorable data” before moving forward with reductions.
“There are no cracks here that would cause the Fed to rush to the rescue with rate cuts, and the labor market is consistent with a continuation of slowing inflation,” said Robert Frick, corporate economist at Navy Federal Credit Union. . “That should lead to one or two cuts this year.”
The Fed is targeting its main lending rate in a range between 5.25%-5.50%, the highest in 23 years and a level it has stayed at for about a year.
There have been signs of cracks in the labor market recently, with purchasing managers’ surveys showing contraction in hiring for both the manufacturing and service sectors.
Moreover, broader economic growth is slowing. Gross domestic product rose just 1.4% on an annual basis in the first quarter and is on track to grow just 1.5% in the second quarter, according to the Atlanta Fed.