TL;DR: Strong labor supply growth continues to drive labor market cooling and higher unemployment, but employment is holding up ok. 1/ Probably the first detail that jumped out at me in today's jobs report was the increase of the unemployment rate to 4.1%, the highest since late 2021. 2/ Growth in nonfarm employment also appears to be slowing - the 3 month average of 177K per month is the slowest we've seen since early 2021. 3/ HOWEVER: a lot of the "deep cuts" in the report look less concerning. 4/ The increase in unemployment was mostly driven by an increase in new labor force entrants and labor force re-entrants. Unemployment due to permanent layoff actually fell to its lowest level since January. 5/ The share of prime-working-age Americans with a job was unchanged at 80.8% - just shy of a 23 year high. Employment has remained steady even as unemployment has risen - suggesting a rise in "steady state" job search activity rather than job losses. 6/ The share of the labor force that is working part time for economic reasons (people who want full time jobs but can't find them) fell in June to its lowest level of the year. 7/ Job gains were strongest in health care & social assistant (+82K), government (+70K), and professional & business services excluding temp agencies (+32K). The biggest job losses were in temp agencies (-49K), durable goods manufacturing (-10K), and retail trade (-9K).
I hate to say it, but this is the type of report the fed wanted especially with regards to wage growth. The fact that its slowed is obviously helpful to them but unfair to workers even though the 3.9% is still above CPI of 3.4%. However good to see the labor market still solid for prime age workers and the 206k beat expectations but again several signs that things are beginning to slow. Could the first rate cut be in July instead of Sept? We'll see.
Director of Economic Research
3dShare of the labor force working part time for economic reasons