Job growth continues at consistent, above-average pace. Employers added 372,000 personnel to payrolls in June, bringing the total job count to within 0.4 percent of the February 2020 high. June marked the fourth consecutive month with an unemployment rate of 3.6 percent and job creation in the high-300,000 range. While last month’s hiring trails measures from earlier in the year, it is nevertheless well above other periods of tight unemployment. Encouragingly, robust employment growth is occurring in sectors that have already surpassed pre-pandemic headcounts, in addition to other fields that continue to steadily recover.
Favorable jobs numbers likely to reinforce Fed policy targets. Consistently strong employment growth amid historically low unemployment may give the Federal Reserve further confidence to raise the fed funds rate by 75 basis points again in late July. Given labor demand in excess of supply, with roughly 1.9 open positions per job seeker, the Fed will likely prioritize combating inflation over preserving employment growth. In another indication of the strength of the labor market, non-elective part-time employment is below the pre-pandemic measure. Most other unemployment metrics continue to exceed those benchmarks to some degree.
Wage growth a factor in Fed decision making. By raising borrowing costs for employers, the central bank intends a drop in labor demand to help temper inflation by cooling wage growth. Average hourly earnings were up 5.1 percent year-over-year in June, down from recent months but above the historical average. While higher wages help employees keep up with sticker shock, they simultaneously contribute to higher prices going forward by lifting production costs.