Key takeaways
- The Bureau of Labor Statistics (BLS) reported that the U.S. economy added 206,000 jobs in June 2024, a report in line with consensus expectations. However, there were 111,000 of downward revisions for April and May. That took the 3-month average of payroll gains down to 177,000, the slowest pace since January of 2021.
- Job growth was narrowly based for June, with government and healthcare jobs accounting for nearly three-fourths of total job gains.
- The unemployment rate ticked up to 4.1%, its highest level since 2020 and has increased in each of the last three months.
- Meanwhile, average hourly earnings were up 0.3% month-over-month (MoM) and 3.9% year-over-year (YoY) in June, the slowest pace since 2021.
- The June jobs report underscores a steady jobs market with wage gains for the U.S. consumer. This jobs report is a step in the right direction in the eyes of the Federal Reserve, however they will look for additional data that the economy is moderating before considering rate cuts later this year.
Contributors
Cristina Dwyer
Analyst, J.P. Morgan Wealth Management
A softer labor market
The June jobs report highlights a steady labor market that is ever so slightly loosening. The U.S. labor market added 206,000 jobs in June, in line with expectations. May’s nonfarm payroll gains were revised down 54,000 to 218,000, while April’s nonfarm payroll gains were revised down by another 57,0000 to 108,000.1
June’s nonfarm payroll gains bring the three-month average employment gain to 177,000 jobs, the slowest pace since January 2021. This highlights that restrictive Federal Reserve policy is cooling the pace of job growth.
U.S. nonfarm payroll employment
In thousands
This chart shows the monthly nonfarm payroll employment change in thousands from April 2023 to June 2024. The chart has two lines representing the 3-month moving average and 2018-2019 average monthly change at the level of 178,000.
- In April 2023, the nonfarm payroll was 278,000, 3-month moving average was 237,000;
- In May 2023, the nonfarm payroll was 303,000, 3-month moving average was 273,667;
- In June 2023, the nonfarm payroll was 240,000, 3-month moving average was 273,667;
- In July 2023, the nonfarm payroll was 184,000, 3-month moving average was 242,333;
- In August 2023, the nonfarm payroll was 210,000, 3-month moving average was 211,333;
- In September 2023, the nonfarm payroll was 246,000, 3-month moving average was 213,333;
- In October 2023, the nonfarm payroll was 165,000, 3-month moving average was 207,000;
- In November 2023, the nonfarm payroll was 182,000, 3-month moving average was 197,667;
- In December 2023, the nonfarm payroll was 290,000, 3-month moving average was 212,333;
- In January 2024, the nonfarm payroll was 256,000, 3-month moving average was 233,667;
- In February 2024, the nonfarm payroll was 236,000, 3-month moving average was 264,667;
- In March 2024, the nonfarm payroll was 310,000, 3-month moving average was 267,333;
- In April 2024, the nonfarm payroll is 108,000, 3-month moving average was 218,000;
- In May 2024, the nonfarm payroll is 218,000, 3-month moving average is 212,000;
- In June 2024, the nonfarm payroll is 206,000, 3-month moving average is 177,333.
Source: Bloomberg Financial L.P. Data as of July 5, 2024.
Industry breakdown
Job growth was narrowly based in June, with government and healthcare jobs accounting for nearly three-fourths of total job gains. The strong increase in government jobs (+70,000) was driven by job gains at the state and local level (+65,000).
Private sector payrolls continued to slow in June to 136,000 from 193,000 in May, with healthcare and social assistance accounting for 82,000 of those jobs.2 Diving deeper into the details, goods producing jobs rose 19,000 in June, as strong gains in construction employment offset a decline in manufacturing jobs. There was some June weakness in the service sector, as employment increased 117,000, down from 181,000 in May. While the healthcare sector saw strong gains in June, most other service sectors lost momentum.
Employment was weak in the professional and business services, contracting by 17,000 due to a large decline in temporary help.3 Employment in the leisure and hospitality sector was quite weak in June, contributing only 7,000 jobs.
Unemployment rates and growth
The labor market remains steady, despite showing some signs of moderating. A portion of the data shows that we’re starting to see the job market come into equilibrium, which should slow the pace of job growth. The overall unemployment rate ticked up to 4.1% in June, its highest level since 2020 and has increased in each of the last three months. This uptick was driven by a rise in the unemployment rate for prime age workers, which account for two thirds of the labor force. There was also a welcome increase in the labor force participation rate to 62.6%, driven by a rise in labor force participation of prime age workers to 83.7%, the highest since February 2022.4
The reading for the June average hourly earnings data, an important measure for inflation, rose 0.3% MoM. Year-over-year (YoY), average hourly earnings have slowed to 3.9% in June, down from 4.1% in May. Most other measures of wage growth are moving in the right direction in the eyes of the Fed; even forward looking measures of wages point to further slowing of wage gains.5
The number of job openings in May unexpectedly rose to 8.14 million from a downward-revised 7.92 million in April according to the BLS Job Openings and Labor Turnover Summary report released this week.6 This release disrupted what has been, and is likely to continue to be, a gradual further cooling trend in labor demand.
U.S. job openings by industry vs. unemployment rate
In thousands vs. percentage
This chart shows the U.S. job openings by industry in thousands vs. unemployment rate from January 2001 to May 2024.
The job openings by industry began at 5,234,000, fell to 2,981,000 by July 2003, then rose to 4,962,000 by March 2007. It then fell to 2,232,000 by July 2009 and rose to 7,489,000 by December 2018. Then, it fell to 4,637,000 by April 2020 and rose to 12,182,000 by March 2022. It fell to 8,140,000 by May 2024.
Meanwhile, the unemployment rate began at 4.2% and rose to 6.2% by July 2003. It fell to 4.4% by May 2007 and rose to 10.0% by October 2009. It then fell to 3.5% by February 2020 and rose to 14.8% by April 2020. It fell to 3.4% by April 2023 and rose to 4.0% by May 2024.
Source: U.S. Bureau of Labor Statstics. Data as of July 5, 2024.
Rate implications
The June jobs report underscores a steady jobs market with wage gains for the U.S. consumer. This jobs report is a step in the right direction in the eyes of the Fed, however they will look for additional data that the economy is moderating before considering rate cuts later this year.
At June’s Federal Open Market Committee (FOMC) meeting, they unanimously voted to hold policy rates steady for the seventh consecutive time, leaving the Fed Funds Target Rate unchanged at 5.25% to 5.50%.7
The Fed said it needs to see more compelling and broader evidence that inflation is moving closer to its 2% target before considering rate cuts later this year. The Consumer Price Index (CPI) rose 3.3% in May, a decline from the 3.4% YoY rise in April.8
Chair Powell underscored that the Fed’s decision on the direction of rates continues to be "meeting by meeting" with the "data leading the way," but noted “modest further” inflation progress.9
The June inflation report is set to be released on July 11 and will play a role in the Fed’s interest rate decision-making process at its next FOMC meeting. However, it’s important to note the Fed’s preferred measure of inflation, the Personal Consumption Expenditures (PCE) deflator, will be released July 26 and will likely play a larger role in what they decide moving forward. While we believe the Fed will begin cutting rates at the end of the year, that timeline could be pulled forward if both inflation and employment further cool in the months ahead.
References
Bureau of Labor Statistics. “The Employment Situation—June 2024.”
Ibid.
Ibid.
Ibid.
Ibid.
Bureau of Labor Statistics, “May Job Openings and Labor Turnover Summary.” (June 2024)
Federal Reserve. “Federal Reserve issues FOMC statement.”
Bureau of Labor Statistics. “Consumer Price Index – May 2024.”
Board of Governors of the Federal Reserve System. “Speech – Opening Remarks.”
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