Jobs Report June 2024:

Job seekers attend the South Florida Job Fair held on June 26, 2024 at the Amerant Bank Arena in Sunrise, Florida.

Joe Raedle | Getty Images

The U.S. economy again created slightly more jobs than expected in June, although the unemployment rate rose, the Labor Department reported Friday.

Nonfarm payrolls rose 206,000 for the month, better than the 200,000 Dow Jones forecast but less than the downwardly revised gain of 218,000 in May, which was well below the original estimate of 272,000.

The unemployment rate unexpectedly rose to 4.1%, matching the highest level since October 2021 and sending a mixed signal to Federal Reserve officials weighing their next move on monetary policy. The unemployment rate had been forecast to hold steady at 4%.

“The labor market is still bending but not breaking, which strengthens the case for rate cuts,” said David Russell, global head of market strategy at TradeStation. “It’s not too hot and not too cold. Goldilocks is here and September is in play” for a Fed rate cut.

The rise in the unemployment rate was due to the fact that the labor participation rate, which indicates how many people of working age are employed or actively looking for a job, rose to 62.6%, an increase of 0.1 percentage points.

A broader unemployment rate that includes discouraged workers and those working part-time for economic reasons held steady at 7.4 percent. Household employment, which is used to calculate the unemployment rate, rose by 116,000. The household survey also showed a 28,000 decline in full-time workers and a 50,000 increase in part-time workers.

While job creation in June exceeded expectations, much of that was due to a 70,000 increase in government jobs. Health care, a consistent sector leader, also added 49,000 jobs, while social assistance added 34,000 and construction added 27,000 jobs.

Several sectors saw a decline, including professional and business services (-17,000) and retail (-9,000).

In terms of wages, average hourly earnings rose 0.3% for the month and 3.9% from a year ago, both in line with estimates. The average workweek was stable at 34.3 hours.

Stock market futures rose slightly after the report, while government bond yields were negative.

In addition to the substantial revision to May payrolls, the Bureau of Labor Statistics cut April to just 108,000, a drop of 57,000 from the previous estimate. Combined, the revisions cut 111,000 from the April and May totals.

Long-term unemployment rose sharply in the month, by 166,000 to 1.5 million, compared with 1.1 million a year ago. The BLS said the share of long-term unemployed as a percentage of the total unemployment level was 22.2%, compared with 18.8% a year ago.

The Black unemployment rate rose to 6.3%, the highest since March. The rate for Asians rose a full percentage point to 4.1%, the highest since August 2021.

The report is based on Federal Reserve officials’ deliberations on their next steps in monetary policy.

At their most recent meeting, policymakers signaled that they want to see more progress on inflation before cutting rates, but noted that a strong economy and, in particular, a solid labor market reduce the need for quick action, according to minutes released earlier this week.

Despite evidence to the contrary, markets are pricing in two rate cuts, assuming a quarter-percentage point reduction, before the end of 2024. Fed officials planned only one cut at their June meeting, saying they need “additional favorable data” before moving forward with the cuts.

“There are no cracks here that would prompt the Fed to come to the rescue with rate cuts, and the labor market is consistent with continued slowing inflation,” said Robert Frick, chief corporate economist at Navy Federal Credit Union. “That should lead to one or two cuts this year.”

The Fed is targeting a 5.25%-5.50% benchmark lending rate, the highest rate in 23 years and where it has been for about a year.

There have been signs of cracks in the labor market recently, with surveys of purchasing managers showing slowing hiring in both manufacturing and services.

In addition, broader economic growth is slowing. Gross domestic product rose just 1.4% year-on-year in the first quarter and is on track to grow just 1.5% in the second quarter, the Atlanta Fed said.

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