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What to Look for in the June U.S. Government Jobs Report
A key government report released Friday is expected to show slowing but steady job growth in June, with forecasters growing increasingly confident that the U.S. economy is headed for a “soft landing.”
Recent economic signals show that the labor market is normalizing:
The nation’s unemployment rate has remained at or below 4% for 30 straight months. Payroll gains averaged 277,000 in 2024, up from 251,000 the year before and 165,000 in 2019, before the pandemic hit the economy in 2020. Job openings, while still higher than in 2019, are trending down in what economists see as a more typical balance between employer demand and the number of available workers. Companies have announced plans to cut about 435,000 jobs this year, down 5% from the same period in 2023, according to outplacement firm Challenger, Gray & Christmas. Wage pressures continue to ease, giving companies more room to cut prices.
Forecasters are looking for signs that the pace of hiring is slowing, in line with slowing inflation, but not falling dramatically, which would revive fears of a serious crisis.
Analysts polled by FactSet expect employers to add 192,000 jobs last month, down from 272,000 in May. A substantial slowdown in hiring in June compared with the start of the year would further confirm the slowdown in the economy, as the Federal Reserve hopes. Starting in 2022, the Fed has raised interest rates to their highest level in decades in an effort to curb growth and rein in inflation.
The unemployment rate is expected to remain stable at 4% in June, suggesting steady job growth. In this regard, Elise Gould, an economist at the Economic Policy Institute, noted in a report that the unemployment rate for young adults is now at the same level as before the pandemic.
Monthly wage growth in June is also expected to slow to 0.3% from 0.4% the previous month, which would be in line with other recent data suggesting that inflation is gradually fading.
When will the Fed lower interest rates?
The Fed’s main challenge in getting the economy back on track after the pandemic has been balancing the supply of workers with the demand for them without tipping the economy into recession. And so far, the central bank has largely defied critics who predicted that aggressive monetary tightening would lead to a crash.
In a speech this week in Sintra, Portugal, Fed Chairman Jerome Powell said inflation was slowing again after surging earlier this year, The Associated Press reported. The personal consumption expenditures index — a key gauge closely followed by the Fed — slowed in May to its smallest annual gain in three years, raising the odds that the central bank will cut rates by year’s end.
That doesn’t mean policymakers are ready to let up on their fight against inflation. Powell stressed that central banks still need to see more data showing that annual price growth is moving closer to the Fed’s 2% annual target, and he warned that cutting rates prematurely could reignite inflation.
“We just want to understand that the levels we're seeing are a true reading of underlying inflation,” Powell said.
Minneapolis Fed President Neel Kashkari says signs of 'high-pressure' economy could be 'cooling' 07:46
Most economists expect Fed officials to keep rates unchanged at their meeting in late July, although they see a quarter-point cut in September as likely.
“The Fed is increasingly attentive to downside risks to the labor market, which reinforces our confidence in the outlook for a first rate cut in this easing cycle, expected in September,” said Ryan Sweet, chief U.S. economist at Oxford Economics, who also expects another Fed rate cut in December.
Ian Shepherdson, chief economist at Pantheon Macroeconomics, also expects a quarter-point rate cut in September. That could be followed by deeper cuts in November and December, but only if the labor market weakens more than the Fed currently expects.
More information on CBS News
Alain Sherter
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