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Unemployment Drifts Up in June

US economy shows solid job growth

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U.S. payrolls increased by 206,000 in June, slightly beating expectations, and the unemployment rate increased to 4.1%, the highest level since October 2021.

The latest employment report from the U.S. Bureau of Labor Statistics may affirm the prevailing view that the economy is slowing, but not enough that it would prompt more aggressive interest rate cuts from the Federal Reserve. A hot labor market makes it more difficult to lower rates, while the central bank is also mandated to keep the job market as strong as possible without triggering inflation. That’s all to say that a rate cut in September may be in the offing following this report.

“The June jobs report shows continued steady employment gains, another exceptionally strong month for the U.S. labor market by conventional benchmarks,” said Aaron Terrazas, Glassdoor chief economist. “But the foundation is shaky, and cracks are increasingly visible beneath the surface metrics.”

He noted that job gains for April and May were revised sharply downward by a combined 111,000 jobs, long-term unemployment is rising, and annual wage gains fell below 4%.

“The June data is brimming with signs of a slowing labor market—rising unemployment, slowing job gains, and moderating wage growth,” said Nick Bunker, economic research director for North America at the Indeed Hiring Lab. “The question is whether the recent run of data is simply a continuation of the relatively painless moderation of the past few years or the beginning of something more damaging. The labor market is chugging along for now, but evidence is mounting that if it continues to slow down, it could stall.”

Noah Yosif, chief economist at the American Staffing Association, said that “on the one hand, the labor market continues to cool, enabling the Fed to remain focused on inflation and raising the potential for its first rate cut in September, should prices follow suit. On the other hand, the cadence of cooling is accelerating and could pose downside risks to a soft landing for the economy at large. As gains become increasingly concentrated within a few sectors, a greater number of jobs are available, but with fewer people eligible to enjoy them.”

Bunker added that for the past few years, the moderation of the U.S. labor market was a mostly welcome trend, “but now that the labor market has readjusted, any further cooling is riskier.”

Industry Breakdown

Job creation in June—and over the year—has been due in large part to a surge in public-sector and health care hiring, said Julia Pollak, chief economist at ZipRecruiter.

“The government has now added about 600,000 payrolls over the past year, mostly at the local level,” she said. “That’s both a sign of election year hiring in schools and law enforcement and of a deterioration in the private sector, which is making it easier for government agencies to compete for talent.”

Government employment rose by 70,000 in June, health care employers added 49,000 jobs last month, social assistance increased by 34,000, and construction was up by 27,000 jobs. The public sector, social services, health care, and construction accounted for 87% of total payroll gains in June.

Several sectors saw declines, including professional and business services (down 17,000) and retail (down 9,000).

Pollak pointed out weak overall payroll gains in leisure and hospitality (7,000 new jobs) and a loss of over 3,000 jobs in restaurants and bars.

“We’ll likely see more stability going into the third quarter, with jobs maintaining in the travel, leisure, and hospitality sectors due to summer vacations and companies starting their post-grad hiring of the class of 2024,” said Amy Glaser, senior vice president at Adecco.

Ger Doyle, senior vice president at ManpowerGroup and head of Experis North America, said that demand is shifting in some key sectors.

“The demand we’re seeing is driven by sectors including legal, sales, marketing, and creative, and we’ve seen an uptick in demand for managers, demonstrating the need for leadership to help businesses and employees navigate the recovery.”

Long-Term Unemployment Rises  

People reporting that they have remained unemployed—without a job and looking for one—rose sharply in June, up 166,000 to 1.5 million, compared with 1.1 million a year ago.

“The increase in the unemployed population was driven entirely by individuals out of work for 27-plus weeks,” Terrazas said. “The number of people unemployed 27-plus weeks is now at its highest since February 2022—and above where it was in 2018-19.”

Bunker said that the jobless rate itself isn’t really the issue, it’s the steady rise that’s concerning. “Over the past several months, the rate at which employed workers have moved into unemployment has steadily increased,” he said.

Good news metrics for the month include the labor-force participation rate, which the share of working-age people who were employed or seeking work, ticking up to 62.6%—an indication that more people entered the labor market in June. And the prime-age employment rate, which focuses on those between ages 25 and 54, rose to 83.7%, its highest in more than 22 years.

Missing Work

Terrazas pointed out that work absences due to adverse weather hit a 21-year high for the month of June. About 83,000 workers reported not working due to weather-related disruptions in June, the highest number of such absences since 2003.

“Early summer is historically a lull in weather-related workplace absences, which tend to peak in late summer due to hurricane season and during winter,” Terrazas said. “But early summer absences due to adverse weather have been rising as unseasonal storms and intense heat become more frequent.”


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