Total nonfarm payroll employment increased by 209,000 in June, a smaller magnitude of growth than the downwardly revised 306,000 in May, according to the latest jobs report from the Bureau of Labor Statistics (BLS). Employment has grown by an average of 278,000 per month over the first six months of 2023, lower than the average of 399,000 per month in 2022.
Job growth was widespread and positive for government (+60,000), health care (+41,000), social assistance (+24,000), and construction (+23,000) sectors.
“The economic resilience of the U.S. economy was apparent in today’s jobs report. June marked the sixth month of positive job growth throughout 2023 with wages rising,” says Zonda chief economist Ali Wolf. “The Federal Reserve paused their short-term rate increases in June to give time for their policy to filter into the economy. Today’s jobs report, especially given the wage growth, helps build the Fed’s case that they need to resume raising rates soon assuming inflation remains elevated.”
Mike Fratantoni, senior vice president and chief economist at the Mortgage Bankers Association (MBA), and Doug Duncan, chief economist at Fannie Mae, agree with Wolf that the pace of job and wage growth are above the Federal Reserve's inflation target, and it is likely there will be a 25-basis-point increase in July.
"These figures indicate that the Federal Reserve's monetary policy tightening has not, as of yet, caused a significant enough slowing of the labor market, suggesting that more monetary policy tightening is likely on the horizon," Duncan says.
In June, average hourly earnings for all employees on private nonfarm payrolls increased by 0.4% to $33.58. Over the past 12 months, average hourly earnings have increased by 4.4%, according to the BLS.
The labor force participation rate was 62.6% for the fourth consecutive month, and the employment-population ratio, at 60.3%, was unchanged over the month.
Both the unemployment rate, 3.6%, and the number of unemployed persons, 6 million, changed little in June. The unemployment rate has ranged between 3.4% and 3.7% since March 2022.
“The incoming economic data has been filled with conflicting signals. Manufacturing activity remains quite weak, while consumer spending has held up somewhat better, and new-home construction and sales have picked up," says Fratantoni. "Our forecast is for a slowdown in economic activity in the second half of 2023, with a recovery in early 2024. The June employment report reinforces that forecast."
The number of long-term unemployed—those jobless for 27 weeks or more—was 1.1 million and accounted for 18.5% of the total unemployed. The number of persons not in the labor force who currently want a job was 5.4 million, little changed compared with May. The number of discouraged workers, a subset of the marginally attached who believe that no jobs were available for them, decreased by 112,000 to 310,000 in June.
"The number of workers who hold a part-time job but would prefer full-time employment rose by over 450,000 in June, which is potentially an indicator of slightly softening labor demand," says Duncan. "Meanwhile, residential construction employment, including specialty trade contractors, grew by over 10,000 in June, a robust figure that should help builders add homes to alleviate supply constraints."
