U.S. Economy Adds 209,000 Jobs in June as Pace of Hiring Cools

The U.S. labor market continued to show signs of cooling last month, but the streak of job gains extended for the second and a half year in a row, the Labor Department said Friday.

U.S. employers added 209,000 seasonally adjusted jobs and the unemployment rate stayed near the lowest level in more than half a century, pushing the unemployment rate to 3.6% from 3.7% in May. Decreased.

Employment rose for the 30th straight month in June, but the increase was down from a revised 306,000 in May and the slowest since the streak began.

Wages, measured by workers’ average hourly wages, rose 0.4% month-on-month and 4.4% since June 2022. The rise was in line with May’s trend but higher than expected, a potential concern for Federal Reserve officials who have been trying to keep it in check. Raise interest rates gradually to raise wages and prices.

Still, the reaction to the report from economists, investors and labor market analysts has been largely positive. The resilience of the job market has raised hopes that inflation can be contained while the economy continues to grow.

“Twelve to 18 months ago, if you were to ask what had to happen for a soft landing, it would look a lot like what happened,” said Jason Draho, head of Americas asset allocation at UBS. Stated. “Not many people, including some very prominent economists, thought it was possible, and while it may not happen yet, we are on a consistent path. I’m here.”

President Biden unqualified to praise the report, highlighting that the unemployment rate has remained below 4% for the longest months since the 1960s. “This is Bidennomics in action,” he said in the paper. statement announced by the White House.

For more than a year, fears of an impending recession have dominated the economic debate. Most economists expected a recession in the US by now, in part because of rapidly rising interest rates. This rise in credit costs shocked the banking sector and put a lid on the housing market for some time.

However, the restraining effect of higher interest rates is being met by strong incomes and spending for many households and the sustainability of businesses, both underpinned by emergency pandemic support from Congress and the Fed. Families, business owners and investors alike have had to contend with the frustrating realities of inflation and economic uncertainty, but growth has remained mostly challenging.

Morgan Stanley Chief Economist Ellen Zentner said the firm is an outlier in not forecasting a recession in the past year. Recent turnaround in consumer sentiment This could be related to “perception that the economy is much more resilient to a sharp tightening of the monetary policy stance than previously expected.”

Inflation data due next week are expected to show inflation slowing to an annual rate of 3.2% from a peak of 9.1% last year, according to the Cleveland Fed. Some economists believe it may be possible to curb inflation altogether without triggering a large rise in unemployment. But opinions remain divided.

“The environment continues to say, ‘pick the data points that support your story,’” said Oren Krachkin, chief U.S. economist at Oxford Economics. “I still think a recession is more likely.”

Some analysts feared the unemployment rate for black workers could rise to 6% in June after hitting a low of 4.7% two months ago.

Industries related to the manufacture, transportation and sale of goods appear to be experiencing setbacks after the massive explosions of 2020-2021. Jobs in retail, transportation and warehousing all fell in June. However, as the service sector performed well, the laggard government jobs also increased significantly.

The middle-aged labor force participation rate, the percentage of people aged 25 to 54 who are in their prime or looking for work, has risen to its highest level since 2002. Economic growth forecasts for the first half of this year have been revised upwards.

Big banks such as JPMorgan Chase and Goldman Sachs are currently betting the odds of a recession this year are low. The once stagnant housing market is starting to show signs of a boom. Recent data show that manufacturing construction is booming. Consumer spending is down from 2021 highs, but many retail analysts say it may simply be readjusting to pre-pandemic trends.

Former Fed economist Claudia Sahm said the key question is whether the economic slowdown “is a sign of rebalancing and then going on.”

As the Fed responds by keeping borrowing costs high for much longer than companies expect, a growing group of investors believes sustained growth could sow the seeds of its own doom. As such, some debt burdens may become unsustainable for companies, particularly those that rely on bank loans or lines of credit, or need to seek new funding from investors. .

Corporate defaults rose last month to more than double the level in the same period last year, according to Moody’s Investors Service. Some economists see the trend, which is usually alarming, as a sign of normalization from a time when bankruptcies were relatively unusually rare after a flood of government bailouts. Some people

“The rise in defaults as interest rates rise isn’t all that surprising,” said Justin Wolfers, professor of economics and public policy at the University of Michigan.

Walt Lowen, the third-generation owner of the 113-year-old glassware company Susquehanna Glass Company in Columbia, Pennsylvania, is a microcosm of the instability the U.S. economy has experienced since the pandemic began.

Rowen said business was strong in 2019, with revenue of about $5 million. When the pandemic hit and Susquehanna grass wasn’t recognized as a significant business. “We had to fire everyone,” he said. “We could never get people to work remotely.”

He survived the last three years thanks to the forgiveness of two loans under the Paycheck Protection Program and a third long-term loan from the Small Business Administration. Now that the pandemic has subsided and supply chains are recovering, businesses are stable but face new challenges.

“In 2019, I was paying entry-level factory workers about $10 an hour. It’s a percentage increase, but it’s not ‘it’s going to come down again,’ Lowen said. “But glass prices are starting to come back.”

Securing stable funding for businesses is a pressing issue, he said, adding, “The interest rate hikes introduced by the Fed have made it easier for companies like me to borrow on basic lines of credit than before5,6. % increase,” he said.

Interest payments to banks have doubled, making it more dependent than ever on strong holiday sales to pay off enough debt this year. Despite all this, Loewen’s outlook is only partially clouded.

“We’ve seen all the ups and downs. My grandparents went through World War I, World War II, and the Great Depression, so I got COVID-19,” he said. rice field. “We are making adjustments. I think the worst is over. I think it was here that we could survive at this point.”

However, he admitted that others may not be so lucky.

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