The June jobs report showed the slowest pace of hiring since the early innings of the pandemic, but rising wages and an ultra-low unemployment rate should keep the Federal Reserve on track to raise interest rates at the next Fed meeting, experts say.
Nonfarm payrolls expanded by 209,000 last month, the Bureau of Labor Statistics said Friday, missing economists' forecast for the creation of 230,000 jobs. Adding to the evidence of an economy that's cooling slightly, payroll figures for May were revised down to 306,000 from the 339,000 new hires originally reported.
The unemployment rate, which is derived from a separate survey, ticked down to 3.6% from 3.7% to remain at levels last seen more than 50 years ago.
Although hiring slowed last month to the lowest level since December 2020, the addition of 209,000 new jobs was still well above the 183,000 monthly average recorded between 2010 and 2019. It was also higher than the 100,000 per month required to keep up with the increase in the working age population.
The June jobs report indicates that the Fed's efforts to combat inflation by introducing slack into the squeaky-tight labor market via an aggressive campaign of interest rate hikes might be having some effect. However, the fact that average hourly earnings rose 0.4% vs the 0.3% estimate shows that wage growth pressure remain to the upside.
The central bank's rate-setting committee, the Federal Open Market Committee (FOMC), paused in its campaign of rate hikes when it last met in June. Although experts say the latest jobs report offered something for hawks and doves alike, the consensus expectation is for the FOMC to hike rates by another 25 basis points (0.25%) at least once more this year.
With the June jobs report now a matter of record, we turned to economists, strategists and other experts for their thoughts on what the data means for markets, macroeconomics and monetary policy going forward. Please see a selection of their commentary, sometimes edited for brevity or clarity, below.
Jobs report: the experts weigh in
"Flying in the face of most other job indicators, nonfarm payrolls showed some cracks in June, as private payrolls growth slowed sharply, though a lower jobless rate and peppy wage growth still flag a likely Fed rate hike this month." – Sal Guatieri, senior economist at BMO Capital Markets
"Another muddled and nuanced payroll report and broader week of labor market data. Nothing in the release that would change our expectation that the Fed has more work to do. Wage growth ticked up and remains well above levels the Fed would be comfortable with in their efforts to bring inflation back to 2%. Still strong growth in construction speaks to the lingering under supply in the housing market and the likelihood that the likely turning point in the business cycle will be different than those in the past." – Joseph Davis, global chief economist, and Andrew Patterson, senior economist, at Vanguard
"This was a weak employment report, which in normal circumstances should be bad for markets but today is a sign that the U.S. economy is slowing down and will give some Federal Reserve officials pause in terms of where interest rates are today, as well as the path forward. However, it should help Fed officials take note and be patient as monetary policy works with large lags and we believe they have done enough already to slow economic growth." – Eugenio Alemán, chief economist at Raymond James
"Don't be fooled by the headline commentary; this is another really solid jobs report. The Prime-Age 25-54 Employment Rate adjusts for participation and demographic changes. It reached another new high in this expansion! Just 1% from all-time highs now (81.9% in April 2000)." – Skanda Amarnath, executive director at Employ America
"The June jobs report was full of mixed signals. Job growth fell to its slowest pace since 2020, and downward revisions shaved over 100,000 jobs from prior estimates. But wage growth held firm at 0.4%, which will worry Fed officials. A rate hike later this month is almost assured, and at least one additional hike after that is highly likely." – Curt Long, chief economist at the National Association of Federally-Insured Credit Unions
"The below consensus number highlights a labor market that is still tight, with the strong pace of job growth driven primarily by summer hiring. The print reinforces the fact that labor rebalancing issues persist. This doesn't change our forward expectation: our view that the Fed is poised to continue its hiking cycle this month remains intact. The U.S. economy is still growing below potential, inflation continues to decline, but still remains above the Fed's 2% target, keeping the Fed on track for another 25 basis point hike. However, we continue to expect that the Fed will soon reach its terminal rate, bringing it closer toward the end of its most aggressive tightening campaign in generations." – Candice Tse, global head of strategic advisory solutions at Goldman Sachs Asset Management
"This level of job growth might not blow the doors off, compared to May, and that's good. There is no cause for alarm over this decrease. Summer hiring started earlier than usual this year, and as a result we saw a remarkable level of growth reflected in May's report. Fundamentally, I'm not seeing any cracks in the foundation of the labor market. We need to remember that good news for job creation can mean bad news for inflation. The level of job creation we saw in June strikes the right balance. That said, we should be prepared for this jack-in-the-box labor market to continue for the foreseeable future." – Dave Gilbertson, labor economist at UKG
"Today's employment number may have been a bit below expectations, but coupled with the continued low unemployment rate suggests that the recession predicted by the inverted yield curve will be pushed out yet again. According to the CME Fedwatch tool, the probability of a 25 basis point rate hike is substantially higher than it was a month ago, and has inched up recently. Higher wages also announced in the current report suggest that inflation may remain stubbornly high. Today's data may push expectations for an even bigger increase even higher." – Melissa Brown, managing director of applied research at Qontigo
"The labor market is cooling off now at a rapid clip, and more is to come based on all the leading indicators of employment at our disposal. The bottom line here is that this report will satisfy the FOMC hawks, and the Fed is sure to raise rates again this month and will keep expectations of another hike in the market for the next few months. The overall tone of this report suggests that the economy flattened in the second quarter, and I am not convinced this is well appreciated or understood, especially within the confines of the equity market. Nothing in this data is going to change the Fed's mind, but nothing is changing my mind either that this recession is arriving, albeit with longer lags than we have seen in the past, given how the prior unprecedented fiscal stimulus acted as a powerful and lingering impact this past year." – David Rosenberg, founder and president of Rosenberg Research
"One can debate the focus on the job market by the Fed as the key to moving inflation towards their 2% target, but they do. Hence today's report will be further evidence they have work to do as job growth remains positive, although less so than indicated by yesterday's ADP data, the headline unemployment rate dropped by a tenth of a percent, and most importantly, average hourly earnings remain well above the Fed's comfort level. This is good news from an economic growth standpoint, but keeps the Fed on a path towards higher rates." – Steve Wyett, chief investment strategist at BOK Financial
"The Fed is sure to like this report, because when you remove government jobs from the total, then private sector job growth is only 149,000, among the lowest totals of the past three years." – Andrew Crapuchettes, CEO at RedBalloon
"June's payroll report was so bad it's good. The economy is humming along but not overheating. Downward revisions to April and May also helped remove fears about a second rate hike after July. This gives a lot of relief after yesterday's ADP report. Markets can now start to think one and done." – David Russell, vice president of market intelligence at TradeStation
"This morning's jobs survey came in under expectations but was still over 200,000, and our base case in tracking the Fed's decision to raise rates further has been that the labor market needs to soften in a more material way before a 'pause/pivot' in monetary policy will occur. Put simply, when more people are working, they make more money, and they spend it. This has created a stable base of consumer spending over the last 12 to 14 months, keeping prices more durable than current policy is comfortable with." – Brian Mulberry, client portfolio manager at Zacks Investment Management
"The U.S. jobs report was positive and near expectations for June, but downward revisions of past monthly numbers may be a first crack in the market even though we advise clients to retain key employees in this competitive environment. The increase in average hourly earnings and hours worked should provide the Fed confidence to increase rates later this month as it tries to curb inflation." – Eric Merlis, managing director, co-head of global markets at Citizens
"Today's employment report offered additional evidence that the labor market is slowly coming into better balance as job growth slows and labor supply steadily expands. That said, job growth of more than 200,000 is still quite strong even if it is directionally slower than the scorching pace seen over the past year. A stronger-than-expected reading on average hourly earnings, as well as upward revisions to wage growth in earlier months, suggests the Federal Reserve is not out of the woods yet in its fight to tame elevated inflation. We expect a 25 bps rate hike from the FOMC at its upcoming meeting on July 25-26th." – Sarah House, senior economist at Wells Fargo Economics
"In our view, there is nothing in the data that would cause the Federal Reserve to hit the brakes on a rate hike in July. The labor market continues to show sufficient strength that we would expect the Fed to follow through with another 25-basis point rate hike in July, and make few changes to its previous statements regarding the strength of the labor market. Looking forward to the likelihood of a September rate hike, we think that decision will largely be driven by data releases between now and then." – Greg Wilensky, head of U.S. fixed income at Janus Henderson Investors
"While job growth has slowed, the U.S. economy is still adding jobs at a pretty rapid pace, and policymakers at the Fed will not look at this report and feel confident about hitting their inflation targets anytime soon, especially when average hourly earnings rose another 0.4% in June and 4.4% year-over-year." – Jesse Wheeler, senior economist at Morning Consult
"Overall the report points to a labor market that is operating close to full capacity with an unemployment rate close to the half-century low reached earlier this year. The modest uptick in jobless claims in the first half of the year isn't translating into broader unemployment as measured by the benchmark monthly survey. The rise in the prime age labor force participation rate shows the productive capacity of the U.S. economy continues to improve. As far as broader economic growth is concerned, the jobs report suggests real GDP is slowing, but not by enough to cool wage growth yet. The Fed will see the jobs report as affirming the case for a rate hike later this month, and policymakers will probably say that additional hikes will be appropriate if inflationary pressures stay high." – Bill Adams, chief economist at Comerica Bank
"Wage growth is strong, especially for blue-collar workers as businesses appear desperate to attract and retain workers. The latest jobs report all but ensures the Fed will increase rates later this month." – Jeffrey Roach, chief economist at LPL Financial
