U.S. job growth likely decelerated in June following an unexpected surge in the previous month. Economists surveyed by the Wall Street Journal and Dow Jones Newswires anticipate the Bureau of Labor Statistics’ monthly employment report, due Friday, will reveal an addition of 200,000 jobs for June, a decrease from the 272,000 jobs added in May. The unemployment rate is expected to remain steady at 4%.
Goldman Sachs economists noted a below-normal pace of job creation during the spring hiring season, alongside a slight increase in layoffs from low levels. This trend will be closely monitored by Federal Reserve officials, who have maintained interest rates at a 23-year high to curb inflation. Any signs of labor market weakness might prompt the central bank to consider reducing its benchmark rate, potentially benefiting consumers and investors.
Job Growth Concentrated in Select Sectors
Wells Fargo economists are particularly interested in whether job growth continues to be concentrated in a few key sectors: health care, government, and leisure and hospitality. These industries, which account for 36% of all jobs, have contributed 66% of job growth since last June. They have rebounded from COVID-19-related job losses and have been less impacted by high interest rates.
“We expect these three categories to continue to provide a sizable lift to the monthly rate of payroll gains that surpasses their pre-pandemic contribution and helps keep payroll gains afloat despite the current weight of monetary policy,” wrote Wells Fargo economists Sarah House and Aubrey George. However, they predict that these sectors will offer less support to the economy moving forward, with job growth expected to slow to about 150,000 jobs per month over the next year.
Federal Reserve’s Focus on Labor Market
Despite the labor market’s resilience, San Francisco Federal Reserve President Mary C. Daly cautioned that prolonged high interest rates could eventually increase unemployment, potentially accelerating rate cuts. “So far, the labor market has adjusted slowly, and the unemployment rate has only edged up. But we are getting nearer to a point where that benign outcome could be less likely,” Daly remarked.
As the Fed continues to navigate the balance between controlling inflation and maintaining employment, the upcoming employment report will provide crucial insights into the health of the U.S. labor market and the broader economic outlook.
