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The Summary
- The June jobs report from the Labor Department is expected to show employers added about 200,000 roles, fewer than the 272,000 gained in May.
- Economists anticipate the still robust labor market is continuing to slow as inflation has inched down, too.
- The unemployment rate is expected to have remained at 4% last month, a historically low level not exceeded for over two years.
A cooldown but not a crash: That’s roughly the picture economists expect the latest government data to paint — again — of the American labor market.
The June jobs report, set for release at 8:30 a.m. ET Friday by the Bureau of Labor Statistics, is expected to show employers added about 200,000 nonfarm jobs. That would be fewer than the 272,000 roles that were added the month before in a surprisingly strong report that defied long-running forecasts of a sharper pullback in hiring. Instead, the U.S. labor market this year has remained robust even as it gradually tightens.
“Right now we’re seeing a job market that is experiencing what I like to call a modulated cooldown,” Nela Richardson, chief economist of payroll processor ADP, told reporters this week. “It’s striking the right note at the right time.”
ADP’s own data on private-sector hiring showed Wednesday that just 150,000 roles were added in June, fewer than expected, driven largely by the leisure and hospitality industry.
Other labor market indicators point to steadily slowing growth after red-hot hiring boosted workers’ job prospects and pay during the recovery from the pandemic. The nation’s unemployment rate has held at or below 4% — a historic low — for well over two years, and analysts expect Friday’s report to show it remained at that level in June.
On Wednesday, however, the Labor Department reported initial claims for unemployment benefits continued to trend higher, while ongoing unemployment claims hit their highest level since November 2021.
“While firing rates remain low, if you do unfortunately lose your job it is becoming much harder to find a new position,” ING global financial group Chief Economist James Knightley said in a note to clients.
Beyond the labor market, the Institute for Supply Management reported this week what Knightley called a “truly awful” Purchasing Managers Index survey for June.
The figure dropped to 48.8 — below a forecast 52.7 and a significant drop from the 53.8 previous reading. A reading below 50 is considered a signal of contracting activity, and June was just the third time the index has shown a contraction in the past 49 months — but it was the second such occurrence in the past three.
“Survey respondents report that in general, business is flat or lower,” ISM survey committee chair Steve Miller in a statement.
With business activity slowing down, inflation is cooling, too. Last week, the Federal Reserve’s preferred gauge of price growth, the Personal Consumption Expenditures price index, climbed 2.6% from a year ago in May. That was the lowest annual rate since March 2021.
In remarks this week, Fed Chair Jerome Powell said risks to its inflation and employment goals “have come back much closer to balance.” In other words, the odds the Fed will not act aggressively enough to wrestle inflation back down to its 2% target are now closer to even with the odds that unemployment will increase as a result.
“The longer the Fed maintains its high interest rate strategy, the greater the risk that it throttles the economy back too far,” Moody’s Chief Economist Mark Zandi told NBC News. “We’re starting to see higher claims and layoffs and job market pullbacks. That’s an increasing concern.”
