June Jobs Report: US Labor Market Shows ‘Cooling but Not Cold’ Trend

labor market

The June jobs report, expected to be released by the Bureau of Labor Statistics at 8:30 a.m. ET on Friday, will likely indicate a continued slowdown in the US labor market. Consensus estimates compiled by Bloomberg suggest that nonfarm payrolls will have risen by 190,000 in June, with the unemployment rate holding steady at 4%.

In May, the US economy added 272,000 jobs, and the unemployment rate unexpectedly increased to 4%. Key metrics that Wall Street will be monitoring compared to the previous month include:

  • Nonfarm payrolls: +190,000 vs. +272,000 previously
  • Unemployment rate: 4% vs. 4% previously
  • Average hourly earnings, month over month: +0.3% vs. +0.4% previously
  • Average hourly earnings, year over year: +3.9% vs. +4.1% previously
  • Average weekly hours worked: 34.3 vs. 34.3 previously

Cooling Labor Market

The key question for Friday’s report and the remainder of 2024 is whether slowing job growth signals a normalization of the labor market or the early signs of a broader economic slowdown. Bank of America US economist Michael Gapen believes the data will show a labor market that is “cooling but not cool.”

This report comes as the stock market hits record highs amid softer-than-expected economic data, including inflation readings that suggest the US is moving towards a “disinflationary path,” as noted by Federal Reserve Chair Jerome Powell. Investors are anticipating two interest rate cuts this year, with the first likely in September. The CME FedWatch Tool indicates a nearly 73% chance of a rate cut in September.

Recent Labor Market Data

Labor market data released earlier this week showed further signs of slowing. The ADP Research Institute’s National Employment Report indicated that 150,000 jobs were added to the private sector in June, down from 157,000 in May. Additionally, the Department of Labor reported that continuing unemployment claims reached nearly 1.86 million for the week ending June 29, marking the ninth consecutive week of rising claims.

Wells Fargo senior economist Sarah House expressed concerns that the labor market might weaken more significantly than the pre-pandemic economy. “Given the cooling evident over the past year in the labor market, we see further labor market weakening as becoming more worrisome and less welcomed by the Fed,” House wrote in a note to clients.

Signs of Resilience

Despite these signs of slowing, some data suggests the labor market still shows resilience. The Bureau of Labor Statistics reported 8.14 million job openings at the end of May, up from 7.92 million in April. The Job Openings and Labor Turnover Survey indicated that the quits rate, a measure of worker confidence, held steady at 2.2%, near its pre-pandemic levels. The ratio of job openings to unemployed workers also remained at 1.2, close to its 2019 average.

House noted that May’s JOLTS report showed a labor market that resembles its pre-pandemic state. “The JOLTS data suggest that the jobs market continues to move toward its pre-pandemic state, but at a pace that warrants caution more than alarm,” House wrote.

Fed’s Perspective

For now, Powell and the Fed view the labor market’s cooling as manageable. Powell stated during a European Central Bank conference that the labor market isn’t cooling too quickly or steeply. “The labor market data has been kind of what we were hoping to see, and what we have been seeing,” Powell said.

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