June Jobs Data Disappoints | Global Finance Magazine
Missed payroll expectations and revised April and May numbers put the Fed in a tough spot for rate cuts.
June’s employment numbers showed almost no change from the previous month, as the Bureau of Labor Statistics reported a 4.2% unemployment rate and an estimated 57,000 nonfarm payroll jobs, roughly half the 115,000 economists expected.
At the same time, the agency also revised April’s and May’s total nonfarm payrolls down by 31,000 and 43,000 jobs, respectively.
According to BLS data, the financial activities sector experienced no job growth in June, after losing 22,000 jobs in May and 43,000 from the end of January. Meanwhile, healthcare and social assistance added the most jobs in June, with 46,600. Among the sectors with the largest job losses were leisure and hospitality (-61,000), information (-9,000), and retail trade (-7,500).
Sunnier Number
“We know it’s taking people longer to find work, but there are also signs of labor supply constraints in certain industries,” said Nela Richardson, chief economist at ADP, in the company’s National Employment Report for June. “For now, the overall effect is a slowdown in job creation.”
Using its proprietary methodology developed with Stanford Digital Economy Lab, ADP estimated that U.S. private employers added 98,000 jobs in June. Financial activities saw an increase of 14,000 jobs, placing it only behind education and health services (48,000) and trade, transportation, and utilities (15,000) in job creation.
Small businesses remain the largest source of hiring, with companies with 1-19 employees adding 38,000 new jobs. The companies with more than 500 employees added an additional 25,000 new positions. The companies that fell in between those sizes added 44,000 new jobs.
Doomed Rate Cuts
The revised April and May employment numbers and June’s lower-than-expected numbers reveal a softer labor market in the second quarter than previously thought.
The new figures have created a headwind for the Federal Reserve on possible rate cuts, as inflation remains close to its 2% target, according to the authors of a blogpost on the Curzio Research website.
“But a slowing labor market argues for cuts to support growth before conditions deteriorate further,” they wrote. “That is why the revisions matter. Every policy decision is only as good as the data behind it. If the Fed is reacting to numbers that keep getting weaker after the fact, it risks staying tight for too long.”
