US job gains top estimates; jobless rate holds at 3.6%

US employers added more jobs in June than forecast and the unemployment rate held near a five-decade low, suggesting hiring needs are so far eclipsing concerns about the economic outlook.

Nonfarm payrolls rose 372,000 last month following a revised 384,000 in May, a Labor Department report showed on Friday (July 8). The unemployment rate held at 3.6 per cent and average hourly earnings rose 0.3 per cent from a month earlier.

The median estimate in a Bloomberg survey of economists called for a 265,000 advance in payrolls and for the unemployment rate to hold at 3.6 per cent.

Treasury yields surged, US stock futures fell and the dollar index gained as markets extended bets on steep Federal Reserve interest-rate hikes. Swaps traders increased to about 96 per cent the probability of the Fed lifting rates this month by 75 basis points from about 93 per cent before the data.

Another solid month of employment growth further highlights the stark contrast between the resilience of the jobs market and an otherwise bleaker economic picture. The drumbeat of a recession is growing louder, and decades-high inflation is eroding Americans’ paychecks and weighing on consumer spending.

While a number of companies did announce plans in June to cut staffing levels, layoffs have so far been largely concentrated in technology and interest-rate sensitive sectors like housing as the Fed aggressively raises borrowing costs to curb inflation. Meantime, many other businesses still complain of worker shortages and an inability to fill millions of open positions.

The labour force participation rate - the share of the population that is working or looking for work - slipped to 62.2 per cent, and the rate for workers ages 25-54 declined to a four-month low of 82.3 per cent. The number of Americans not in the labor force rose by about half a million to the highest level this year.

Friday’s report showed that average hourly earnings climbed by a still-elevated 5.1 per cent from a year earlier after an upwardly revised 5.3 per cent gain in May. 

For months, employers have been bidding up wages to attract and retain workers, but in the aggregate, pay is still falling short of rapidly increasing prices. While the Fed would welcome a cooling in wage pressures as they seek to limit inflation, a marked slowing in earnings at a time when prices are still extremely high would further curb consumers’ ability to keep spending. 

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US recession fears ‘overblown’: Federal Reserve’s Waller

Inflation is now at a 40-year high and broad-based. Costs have ballooned at grocery stores and gas stations, contributing to President Joe Biden’s dismal approval ratings just months before the November mid-term elections. The Fed has committed to fighting inflation, but concerns are rising the central bank may ultimately tip the economy into recession in the process. BLOOMBERG