The latest June jobs report revealed encouraging news for the U.S. economy, as the country added 209,000 jobs last month. This positive trend contributed to a decrease in the unemployment rate from 3.7% to 3.6%.
Economists and analysts have shared their initial reactions to the report, shedding light on what it means for the Federal Reserve’s interest-rate hike plans. While the data on nonfarm payrolls, also known as NFP, had a mixed impact on the main U.S. stock indexes, they are still expected to experience modest gains.
The Viewpoints of Experts and Analysts
Sustainable Job Growth:
According to Betsey Stevenson, an economics professor at the University of Michigan and a former Obama White House economist, the current number of job additions is actually quite positive. She emphasized that sustaining a high pace of job creation, such as adding 300,000 or more jobs per month, is not feasible in the long run. The current pace reflects a soft landing for the economy and should not be perceived as negative. However, she expressed caution regarding a possible rate hike from the Federal Reserve, suggesting that a second one may not be imminent.
Striking Balance:
Chris Low, the chief economist at FHN Financial, described the latest jobs report as the best of both worlds – striking a balance between being neither too strong nor too weak. He highlighted that the report showcased decent job growth along with stabilizing wage growth. This provides satisfaction for both the Federal Reserve, as momentum decreases, and bond traders who can rest easy knowing there are no signs of unexpected strength.
Overall, the June jobs report carries positive implications for the U.S. economy, demonstrating steady growth and a favorable economic climate. As analysts continue to monitor developments, it remains to be seen how they will impact future decision-making by the Federal Reserve.
Hiring Cooling, but Wage Pressures Persist
Experts Indicate Fed Likely to Hike Rates
Katherine Judge, a senior economist at CIBC, believes that the recent cooling in hiring is a positive development. However, she points out that the pace of hiring still exceeds the growth in the working-age population. Combining this with continued wage pressures and a drop in the unemployment rate, Judge suggests that the Federal Reserve is likely to hike rates by 25 bps in both July and September[^1^].
Black Unemployment Rises, Highlighting Room for Growth
Kate Bahn, an economist and research director at WorkRise, emphasizes that while the overall employment rate is historically high, black unemployment increased from 5.0% in March to 6.0% in June. Bahn mentions the existence of historical exclusion and discrimination in reference to the need for further growth[^2^].
Weakest Gain in Non-Farm Payrolls since December 2020
Andrew Hunter, deputy chief U.S. economist at Capital Economics, notes that the rise of 209,000 in non-farm payrolls for June marks the weakest gain since December 2020. He suggests that this indicates a gradual easing of labor market conditions. However, he believes that the Federal Reserve will still proceed with hiking rates later in the month due to wage growth stagnation[^3^].
Market Reaction to ADP Number Might be Overblown
Roger Ferguson, former Fed vice-chair, cautions against overstating the significance of the ADP number as an indicator. While acknowledging a marginal cooling of the labor market, Ferguson believes it is not a significant change in outlook and expectations. He highlights the importance of average hourly earnings as a factor impacting the Federal Reserve’s decisions[^4^].
As experts continue to analyze the latest employment data, it remains clear that while hiring may be slowing down, wage pressures persist. The Federal Reserve’s potential rate hikes in the coming months reflect their focus on maintaining stability in the job market and the overall economy.
