The June jobs report showed that hiring slightly exceeded expectations, but private-sector hiring was soft and prior months' job growth was revised much lower. The unemployment topped 4% for the first time since late 2021, while wage growth matched a three-year low. After the jobs report, the S&P 500 started slowly but gathered momentum on conviction that Federal Reserve rate cuts are coming soon.
As far as the Fed is concerned, the jobs report looks pretty close to Goldilocks: not too hot and not too cold. Hiring is still pretty solid, but no longer strong, while new entrants to the workforce mean that wage growth is moderating. If anything, it looks as if things may be at risk of getting too soft.
Jobs Report Hits And Misses
The 206,000 overall employment gain topped economists' 189,000 forecast, according to Econoday. Private-sector employers added just 136,000 jobs, missing forecasts for 160,000. Government jobs rose by 70,000.
Hiring gains in April and May were revised down by a combined 111,000 jobs.
Average hourly earnings rose 0.3% in June, matching estimates. Twelve-month wage growth of 3.9% also matched forecasts, equaling April's downwardly revised figure for the lowest since June 2021.
Private-sector hiring was revised down to 108,000 for April and 193,000 for May. That leaves the 3-month average at 145,666, which is the slowest pace since the massive job loss at the start of the pandemic.
Household Survey
The headline job and wage figures come from the Labor Department's monthly survey of employers. The separate household survey details labor force participation, work status and the unemployment rate.
The household survey comes with a higher margin of error than the employer responses, so monthly changes should be taken with a grain of salt. However, the household survey has been known to lead the employer survey at economic turning points, so it shouldn't be ignored.
The rise in unemployment to 4.1% defied predictions of a steady 4% rate.
That came as the ranks of the employed rose by 116,000. Meanwhile, the ranks of the unemployed increased by 162,000, as 277,000 people joined the labor force, meaning they're either working or looking for work.
More Jobs Report Details
Health care and social assistance employment rose by 82,400. Economists consider that growth to be more secular than cyclical in nature.
The construction industry added 27,000 jobs. The leisure and hospitality sector added just 7,000 jobs.
Retailers trimmed 8,500 jobs, while manufacturers shed 8,000 positions. Temporary help jobs dived by 48,900.
Fed Rate Cut Odds
After the June jobs report, markets were pricing in 78% odds of a rate cut by the Sept. 18 Fed meeting, up from 73%, according to CME Group's FedWatch page. Markets now see 75% odds of at least two quarter-point Fed rate cuts by the year's final meeting on Dec. 18, up from 70%.
Odds that the second rate cut could come at the Nov. 7 Fed meeting rose to 37% from 31%. Markets also now see higher odds of 75 basis points in rate cuts this year (29%) than just a single quarter-point cut (25%).
Fed chair Jerome Powell said this week that solid job growth won't prevent Fed rate cuts, but policymakers will pivot faster if hiring weakens.
Ian Shepherdson, chief economist at Pantheon Macroeconomics, wrote that he expects payroll gains to slip below 100,000 per month by September. That could lead the Fed to cut as much as 125 basis points this year, Shepherdson believes.
S&P 500
The S&P 500 rose 0.5% in Friday stock market action, notching its 34th record high this year. The S&P 500 rose each day in the holiday-shortened week and is now up 17% in 2024.
The 10-year Treasury yield slid eight basis points to 4.28%.
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