June 2023 Job Growth Slows to 209,000 but Remains Strong, Fueling Expectations for Fed Rate Hike
In June 2023, U.S. job creation slowed to 209,000 new positions, below forecasts, yet the labor market remains robust. This strength is likely to prompt the Federal Reserve to continue raising interest rates to combat inflation.
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Highlights
- U.S. employers added 209,000 jobs in June 2023, less than expected, with unemployment dropping slightly to 3.6%.
- Government sectors led hiring gains, while retail trade saw job declines.
- Despite slower growth, employment gains remain strong enough to support further Federal Reserve interest rate increases.
The U.S. labor market showed signs of cooling in June 2023 as job additions totaled 209,000, falling short of economists' predictions. However, the pace remains sufficiently high to influence the Federal Reserve's decision on upcoming interest rate hikes.
According to the Labor Department, nonfarm payrolls increased by 209,000 in June, with downward revisions for April and May figures. The unemployment rate edged down from 3.7% in May to 3.6%, aligning with market expectations.
Top Industries Driving Job Growth
Government employment surged by 60,000 jobs, followed by health care (+41,100), social assistance (+24,100), and construction (+23,000). Conversely, retail trade lost 11,200 jobs, and transportation and warehousing declined by 6,900.
Hourly Earnings Exceed Expectations
Average hourly wages rose by 0.4% in June and increased 4.4% compared to last year, surpassing forecasts. The labor force participation rate held steady at 62.6%.
Job Market Strength May Prompt Additional Fed Rate Hikes
Economists Joseph Davis and Andrew Patterson from Vanguard highlighted that although hiring growth slowed, job additions still outpace new labor market entrants. Wage growth remains above levels the Federal Reserve deems comfortable for controlling inflation.
They emphasized that current data does not alter expectations that the Fed will continue tightening monetary policy.
Mike Fratantoni, chief economist at the Mortgage Bankers Association, echoed this view, noting that job and wage growth remain above the pace consistent with the Fed's inflation goals. He anticipates a 25 basis point rate increase at the Federal Reserve's upcoming meeting.
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