US adds 57,000 jobs in June, keeping Fed rate hike on the table
A sharp slowdown in US job creation leaves the Federal Reserve likely to push ahead with an interest rate hike this year, signalling continued pressure on global markets from inflation tied to the Middle East conflict.
US employers added 57,000 jobs in June, roughly half of what economists forecast. The Bureau of Labor Statistics also revised April down from 179,000 to 148,000 and May from 172,000 to 129,000, cutting the previous two months by a combined 74,000.
The overall unemployment rate dipped slightly to 4.2%, though this was driven by 720,000 people leaving the labour force rather than a drop in the number of unemployed. Even with the June miss, the three-month average of roughly 111,000 new jobs suggests the labour market remains stronger than the sluggish levels recorded last winter.
Beneath the headline figure, specific sectors showed strain. Private payrolls grew by 98,000 according to ADP, but hospitality and leisure shed 61,000 jobs despite the boost expected from World Cup matches hosted across the US. Healthcare added 22,000 positions, falling well short of its 38,000 monthly average.
Wages for workers who stayed in their jobs rose 4.4% year-over-year, led by a 5% increase in finance. Separate data indicated job openings, hires and quits barely moved in May. This keeps the US economy in a "low hire, low fire" mode. “The pace of hiring is telling a story of both supply and demand. We know it’s taking people longer to find work, but there also are signs of labor supply constraints in certain industries,” said Dr Nela Richardson, ADP’s chief economist. “For now, the overall effect is a slowdown in job creation.”
For European businesses and investors, the critical implication is the direction of US monetary policy. The softer jobs data makes it highly probable the Federal Reserve will keep its focus on inflation at its late July meeting. Fed officials projected in June that most members expect at least one rate hike before year-end, and rates have been held steady since December.
That hawkish stance is underpinned by inflation that hit a three-year high of 4.2% in May, driven by the Middle East war since February. New Fed chair Kevin Warsh stressed "price stability" and a return to the 2% target at his first press conference. While he told central bankers this week that “inflation risks have come down”, pump prices remain elevated despite a fragile US-Iran peace deal, leaving the June inflation data later this month as the next major test.
