US economy adds 209,000 new jobs as hiring slows

Published On: July 8, 2023 07:45 AM NPT By: AFP/RSS

WASHINGTON, July 8: Hiring in the United States slowed in June, the Labor Department said Friday, with fewer new jobs created than many had expected, a signal that the economy is showing signs of cooling.

The slower pace of hiring will provide some respite for the US Federal Reserve, which recently paused its aggressive campaign of rate hikes to give policymakers more time to assess the health of the American economy.

Despite the swift pace of hikes which have seen the Fed's benchmark lending rate rise by five percentage points since March 2022, inflation remains stubbornly above its long-term target of two percent. The world's biggest economy added 209,000 jobs last month, down from a revised figure of 306,000 in May, the Labor Department said. Meanwhile, the unemployment rate edged down to 3.6 percent, remaining close to historic lows.

- Step in 'right direction' -

The June employment figure was below the median expectation of 240,000 new jobs in a survey of economists conducted by MarketWatch, while the unemployment rate was in line with predictions. "It's a step in the right direction but we're not near the level that we would need to see to be convinced that the labor market is significantly cooling down," Oxford Economics' lead US economist Oren Klachkin told AFP.

Many of the new jobs created in June came from increases in employment in government, health care, social assistance and construction, the Labor Department said. Despite the slowdown in job creation, average hourly earnings ticked up by 0.4 percent month-over-month, rising by 4.4 percent on an annual basis.

"The labor market is still very strong, wages are still rising at a very strong pace, unemployment is still very low, and nonfarm payrolls rose at a pace that is way above what the Fed wants," Klachkin said.

- July hike 'pretty certain' -

Minutes of the Fed's last rate decision published earlier this week showed that several members on its rate-setting committee supported another hike in June to tackle high inflation, but ultimately voted for a pause. Alongside its decision, members of the Federal Open market Committee (FOMC) forecast that two additional increases to the Fed's benchmark lending rate would likely be needed before the end of the year to bring inflation back down.

Among them was Dallas Fed president Lorie Logan, who said she had initially supported a rate hike in June, but chose to defer it given the "challenging and uncertain" economic environment. "At this point, it is important for the FOMC to follow through on the signal we sent in June," she said. Friday's labor data underscores the likelihood that the first of these increases will come this month, according to Oxford Economics' Klachkin.

"Given where the data stand right now I think that a hike this month is pretty certain, and I would say that there's even risks of more hikes in the second half." Futures traders now assign a probability of almost 95 percent that the US central bank will vote to raise interest rates by a quarter percentage point at its next meeting on July 25-26, according to data from CME Group.

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