U.S. job growth in June was half as strong as expected. What can we expect from the Fed?
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The number of nonfarm jobs in the U.S. increased by 57,000 in June, according to the Bureau of Labor Statistics (BLS). This is nearly half the consensus forecast of 110,000, based on a Reuters survey of economists. Estimates ranged from 25,000 to 200,000 new jobs.
Unemployment slowed slightly to 4.2%, although economists had expected it to remain at 4.3% for the fourth consecutive month, Reuters reported.
The labor market figures for May were revised downward by 43,000, to 129,000, and those for April were revised downward by 31,000, to 148,000.
What's Happening in the Markets
Futures on major U.S. stock indices accelerated their gains following the release of BLS data. Nasdaq 100 contracts rose about 0.6%, and S&P 500 contracts rose about 0.3%, although they had been up 0.1–0.2% prior to the release of the data. Dow Jones futures rose 0.4%.
At the same time, U.S. Treasury bonds rose in price: the yield on two-year bonds fell by 6 basis points to 4.11%, while the yield on 10-year bonds fell by 2 basis points to 4.46%, according to Bloomberg. The weaker-than-expected data set led traders to scale back their expectations that the U.S. Federal Reserve would raise interest rates in the coming months, the agency reports. The probability of a rate hike at the Fed’s July meeting fell from 33% prior to the release of the data to 20%, according to traders’ estimates.
What does that mean?
The slowdown in the labor market followed three consecutive months of strong job growth outside the agricultural sector, which exceeded forecasts.
“A few months ago, I was actually concerned because we had lost jobs over the course of five months. Over the past three months, we’ve seen the labor market strengthen, and I don’t see any imbalances [at this time]. We are in this somewhat tedious ‘neither hiring nor firing’ state of the labor market,” said Dan North, senior economist at Allianz Trade Americas (as quoted by Reuters).
Despite the uncertainty caused by import tariffs and the war in the Middle East, U.S. companies were reluctant to lay off employees, given the challenges they faced in recruiting staff following the COVID-19 pandemic, Reuters reported. At the same time, however, the strong job numbers are not reflected in other labor market indicators, including small businesses’ hiring plans. And the share of consumers who find it difficult to find a job approached a 5.5-year high in June, the agency reported, citing data from a Conference Board survey.
“What’s puzzling is that the jobs report was quite strong, while all other labor market indicators were nowhere near as strong. There are some concerns that this could come to an end at some point. It’s possible that the relative pessimism in business surveys will begin to be reflected in the employment data,” warned James Knightley, senior international economist at ING, in a Reuters report.
According to experts, the economy needs to create between zero and 50,000 jobs each month to keep pace with the growth of the working-age population, Reuters reported.
This article was AI-translated and verified by a human editor
