June jobs report: US labor market to show ‘cooling, but not cold’ trend continues

The June jobs report is expected to serve as the latest piece of economic data to reiterate that the US labor market is slowing.

The monthly report from the Bureau of Labor Statistics, scheduled for release at 8:30 a.m. on Friday, is expected to show that nonfarm payrolls rose by 190,000 in May, while the jobless rate remained flat. steady at 4%, according to consensus estimates compiled by Bloomberg. .

In May, the US economy added 272,000 jobs, while the unemployment rate unexpectedly rose to 4%. Here are the key numbers Wall Street will be watching compared to last month, according to data from Bloomberg:

• Nonfarm Payrolls: +190,000 vs. +272,000 ago

• Unemployment rate: 4% vs. 3.9% before

• Average hourly earnings, month-over-month: +0.3% vs. +0.4% ago

• Average hourly earnings, year-over-year: +3.9% vs. +4.1% before

• Average weekly working hours: 34.3 vs. 34.3 ago

The key question in Friday’s report — and throughout the rest of 2024 — will be whether the slowdown in monthly job growth reflects a normalization in the labor market or early signs of a broader economic slowdown.

For now, economists believe Friday’s data will favor the latter.

Bank of America U.S. economist Michael Gapen argued in a weekly research note that the report is likely to show a labor market that is “cooling, but not cold.”

The report also comes as the stock market traded at record highs this week amid a flurry of softer-than-expected economic data, including readings on inflation that have the U.S. moving back toward a “disinflationary path,” according to the chairman. of the Federal Reserve, Jerome Powell. .

Before Friday’s jobs report, investors were pricing in two interest rate cuts this year, with the first most likely to come in September.

According to the CME FedWatch Tool, investors are pricing in a nearly 73% chance the Fed will cut rates in September. Last month, Fed forecasts suggested a rate cut would be appropriate this year.

Read more: What the Fed’s Rate Decision Means for Bank Accounts, CDs, Loans and Credit Cards

Labor market data this week ahead of Friday’s report showed more signs of a slowdown.

On Wednesday, the ADP Research Institute’s National Employment Report showed that 150,000 private sector jobs were added in June, a slowdown from May’s 157,000 job additions.

Meanwhile, data from the Labor Department showed that about 1.86 million continuous jobless claims were filed in the week ending June 29, up from 1.83 million a week earlier. This marked the ninth consecutive week where ongoing claims have increased.

The story continues

With jobless claims rising and the jobless rate at its highest level in more than two years, Wells Fargo Chief Economist Sarah House and other economists have noted that the main concern right now is that the labor market will continue to decelerate to a weaker landing point than the pre-pandemic economy.

“Given the apparent cooling over the past year in the labor market, we see further weakening of the labor market becoming more worrisome and less welcome by the Fed,” House wrote in a note to clients.

Other data this week, however, reflected a job market that is still showing some signs of resilience

On Tuesday, new data from the Bureau of Labor Statistics showed there were 8.14 million job openings at the end of May, up from 7.92 million jobs in April.

The Job Openings and Labor Turnover Survey (JOLTS) also showed the departure rate, considered a measure of workers’ confidence in the labor market, held steady at 2.2%, close to its pre-pandemic levels. Additionally, the ratio of job openings to unemployed workers remained at 1.2, also nearly in line with its 2019 average.

House noted that May’s JOLTS report showed a labor market that, in many ways, “looks like its pre-pandemic self”.

“JOLTS data suggest that the labor market continues to move toward its pre-pandemic state, but at a pace that warrants more caution than alarm,” House wrote.

For now, Powell and the Fed see a job market that is still cooling at a pace the central bank is comfortable with.

Powell said Tuesday during a European Central Bank conference that the labor market is not cooling too quickly, suddenly or rapidly.

Instead, Powell said the labor market data has been “sort of what we were hoping to see and what we’ve seen.”

Josh Schafer is a reporter for Yahoo Finance. Follow him to X @_joshschafer.

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