Experts say that the U.S. economy shouldn’t have created so many new jobs this year. But many companies have been hiring, which has helped the economy grow steadily.
Are we about to finally break the dam? For Friday morning’s U.S. jobs report, here’s what you should keep an eye on.
What we expect
The economy is expected to add 200,000 jobs in June, which is less than the 272,000 jobs that were expected the month before.
As expected, hiring would slow down, but even so, this kind of growth would still be pretty good compared to the past. In the ten years before the pandemic, the economy added 183,000 new jobs every month on average.
Starting to have doubts
Not all of them believe it.
Chief economist at Regions Financial, Richard Moody, said that the government’s employment survey has been less accurate since the pandemic.
Because of this, the first guess of the number of new jobs has often been too high. After the fact changes are usually made that show fewer jobs were actually created.
Moody said, “We don’t think the job market is as strong as the headline job growth prints suggest.”
According to other economic surveys, hiring may have slowed down as well.
One thing is that ADP said the number of private-sector jobs grew the least in five months.
For the fifth month in a row, the ISM service index employment index was going down in June.
It’s also taking longer for people who lose their jobs to find new ones, as the number of people getting weekly unemployment benefits has reached a three-year high.
Not working
Another sign that the job market is slowing down is a rising unemployment rate.
It had been as low as 3.4% a little over a year ago, but in May it rose to 4% for the first time in 28 months.
The unemployment rate is likely to stay at 4% in June.
But the rise in the unemployment rate might not be as big as it seems.
Why is that? The number of workers between the ages of 16 and 24 has grown the most, but the government has a harder time keeping track of these workers.
In that group, the unemployment rate rose from 7.3% in January to 9.2% in May.
On the other hand, the rate of unemployment for workers in their prime is still 3.3%, the same as it was in January.
These workers are between the ages of 25 and 54, and most of them are moms or dads. The economy seems to be in good shape as long as people have jobs.
Pay
In June, hourly wages are expected to rise by 0.3%, which is still too much for the Federal Reserve. When inflation is low, wages tend to go up by 0.1% to 0.2% each month.
But wages may have grown only 3.9% last year, down from 4.1% the year before. This would be the lowest rate of growth in three years.
The Fed thinks that low inflation is consistent with wage increases of 3% or less per year.
What the Fed did
The people in charge of the central bank would like the job market to slow down even more. The Fed had a harder time controlling inflation after the pandemic because there was a lot of demand for workers and pay went up as a result.
The Fed could cut interest rates as early as September, though, if the main indicators of inflation keep going down, like they did in May.
It’s not certain that another good jobs report would stop them. The case for a rate cut would be stronger if it was weaker.
