U.S. hiring and wage growth slowed in June, with nonfarm payrolls increasing by 206,000 and the unemployment rate rising to 4.1%. The data released by the Bureau of Labor Statistics show a cooling labor market, with average employment growth over the past three months at the lowest level since 2021.
The slowdown in hiring, combined with a decrease in inflation, has increased expectations that the Federal Reserve will cut interest rates in the coming months. Investors currently anticipate two rate cuts this year, according to futures markets.
The increase in the unemployment rate, combined with a moderation in inflation, may prompt the Fed to take action sooner rather than later. The central bank’s concern over a potential economic slowdown was evident in the minutes from its June meeting.
While job gains were primarily in health care and government sectors in June, there was a significant decline in temporary-help employment and manufacturing payrolls decreased. Wage growth also cooled, with average hourly earnings rising by 3.9% from a year ago.
Julie Su, acting Labor Secretary, noted that there is a balance between supply and demand in the labor market, with workers taking longer to find jobs but employers eventually finding the workers they need. The data also showed an increase in the participation rate and a 22-year high for prime-age workers.
The numbers are seen as confirmation that the labor market is slowing, making a case for the Fed to lower interest rates in the near future. The report highlights the challenges facing the economy and the potential need for policy support to mitigate any further slowdown.
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