Still, Friday’s report from the Labor Department contained several signs of a slowing job market. The unemployment rate ticked up from 4% to 4.1%, a still-low number but the highest rate since November 2021. The rate rose in large part because 277,000 people began looking for work in June, and not all of them found jobs right away.
The government also sharply revised down its estimate of job growth for April and May by a combined 111,000. And it said average hourly pay rose just 0.3% from May and 3.9% from June 2023. The year-over-year figure was the smallest such rise since June 2021 and will likely be welcomed by the Federal Reserve in its drive to fully conquer inflation. Most economists think the Fed will begin cutting its benchmark rate in September, and the details in Friday’s jobs report did nothing to counter that expectation.
Just two sectors — government and a category that includes healthcare and social assistance, neither of which captures the economy’s underlying strength — accounted for roughly three-quarters of June’s job growth. Economists also noted that job growth from April through June averaged 177,000, a decent figure but still the lowest three-month average since January 2021.
Other economists, while agreeing that the job market is slowing, suggested that it remains resilient.
“Both May and June hiring was above 200,000 even after revisions, and the trajectory looks stable,” said Eric Winograd, U.S. economist at AllianceBernstein. “The best available evidence is that the labor market remains strong and that any deceleration remains modest.”
The state of the economy is weighing heavily on voters’ minds as the presidential campaign intensifies. Despite consistent hiring, relatively few layoffs and gradually cooling inflation, many Americans have been exasperated by still-high prices and assign blame to President Joe Biden.
Economists have been repeatedly predicting that the job market would lose momentum in the face of the high rates engineered by the Fed, only to see the hiring gains show continued strength. Still, signs of an economic slowdown have emerged in the aftermath of the Fed’s series of rate hikes. The U.S. gross domestic product — the total output of goods and services — grew at a lethargic annual pace of 1.4% from January through March, the slowest quarterly pace in nearly two years.
Consumer spending, which accounts for about 70% of all U.S. economic activity and which has powered the expansion the past three years, rose at just a 1.5% pace last quarter after growing more than 3% in each of the previous two quarters. In addition, the number of advertised job openings has declined steadily since peaking at a record 12.2 million in March 2022.
At the same time, while employers might not be hiring so aggressively after having struggled to fill jobs the past two years, they aren’t cutting many, either. Most workers are enjoying an unusual level of job security.
Hal Lawton, CEO of Tractor Supply, a retail chain that caters to customers in rural areas, said his company still feels under pressure to increase wages. Average hourly pay at Tractor Supply, based in Brentwood, Tennessee, workers exceeds $16. And with rent and food prices high, workers are still seeking pay raises.
“You’ve got a tight labor market, and frontline workers are feeling the pinch of their budgets,” Lawton said. “They’re still out there looking for those wage increases.”
During 2022 and 2023, the Fed raised its benchmark interest rate 11 times to try to conquer the worst streak of inflation in four decades, lifting its key rate to its highest point in 23 years. The punishingly higher borrowing rates that resulted, for consumers and businesses, were widely expected to trigger a recession. They didn’t. The economy and the job market instead have shown surprising resilience.
Meanwhile, inflation has steadily declined from a 9.1% peak in 2022 to 3.3%. In remarks this week at a conference in Portugal, Fed Chair Jerome Powell noted that price increases in the United States were slowing again after higher readings earlier this year. Powell did caution that further evidence that inflation is moving toward the Fed’s 2% target level would be needed before the policymakers would cut rates.
“This is the kind of report that the Federal Reserve wants to see,’’ said Gus Faucher, chief economist at PNC Financial Services Group. “This looks pretty darn good. The labor market is not as strong as it was last year at this time. But the labor market at that time was unsustainably strong.’’
Chris Thomas, an engineering manager in Christiansburg, Virginia, said he can see first-hand that the job market has lost momentum. When Thomas began a previous job hunt back in 2021, when tech startups were desperate to hire, he landed interviews with about a third of the companies he applied to. It took him just a month to find a job.
But after he was laid off in April from a job at a startup, it was clear that the landscape had changed. First, he sought leads through his network of friends and business associates. No luck. Then he sent out hundreds of resumes to positions he thought he was qualified to take. He drew few responses.
Finally, after a nearly three-month search, Thomas landed a job at the end of June.
“This is a very, very different job market than the one we had three years ago,’’ he said.
AP Retail Writer Anne D’Innocenzio in New York and AP Economics Writer Christopher Rugaber in Washington contributed to this report.
