Key Takeaways
- Payrolls rose by 190,000, lowest in recent months.
- Wage growth slowed to 3.9%, the least in three years.
- Fed likely to cut rates in September and December.
What Happened?
In June, US job growth experienced a significant slowdown. Payrolls increased by only 190,000, according to a Bloomberg survey’s median estimate. This marks a sharp decline compared to May’s unexpected 272,000 rise.
Wage growth also moderated, with average hourly earnings rising just 3.9% year-over-year, the lowest rate in three years. The unemployment rate stayed steady at 4%, the highest level in over two years.
Why It Matters?
These figures suggest a cooling labor market, which is crucial for investors. Slower job growth and wage increases indicate that inflation may continue to decelerate. This scenario supports the Federal Reserve’s case for multiple interest rate cuts in 2024.
Bloomberg economists Anna Wong, Stuart Paul, Eliza Winger, and Estelle Ou noted, “The recent rise in the unemployment rate flags more urgency.” Investors are now betting on rate cuts during the Federal Open Market Committee meetings in September and December.
What’s Next?
Expect the Federal Reserve to closely monitor these trends. A hiring figure below 200,000 aligns the business survey more closely with the household survey, which has shown weaker labor demand. Forecasters predict that the Fed will have sufficient evidence to begin cutting rates by September.
Additionally, labor force participation might rebound, especially among younger and older workers, correcting May’s anomalies. Stephen Stanley from Santander Capital Markets anticipates a “sizable rebound” in employment measures for these age groups.
