Higher levels of unemployment have been long expected, since workers are often one of the first casualties of an economic slowdown. But there have been broader signs of cooling, too: Americans are pulling back on all kinds of purchases. Home sales are at a standstill. And factories are seeing a drop-off in demand for U.S.-made goods.
Meanwhile, long-term unemployment — a measure of people who have been looking for work for more than six months — rose in June, to its highest level in more than two years.
GET CAUGHT UP
Stories to keep you informed
“The labor market is in a good place, but it’s definitely softening,” said Claudia Sahm, chief economist at New Century Advisors and a former Federal Reserve economist. “Consumer spending is down, the housing sector looks weak — you put those pieces together and, yes, the economy is rebalancing. But the question becomes: How long will this continue?”
In many ways, the economy has returned to its pre-pandemic trajectory this year. Job creation, wage growth and unemployment are all stabilizing after large pandemic-era swings. Economists so far say they are hopeful that things are slowing just enough, though there are also growing concerns that the picture could change this year.
For now, the latest jobs report is decent news for President Biden, whose tenure has coincided with 42 months of consecutive job gains. Employers have created more than 15 million jobs during his administration, with a monthly average of about 380,000 positions. Recently, though, the pace of job creation has slowed to 220,000.
“We look at each month, and every single month has been good news,” Julie Su, the acting labor secretary, said in an interview. “We also look at trends, and the last six months have confirmed those views. We continue to have healthy job growth and historically low levels of unemployment — which most people predicted would not be possible.”
The latest gains were concentrated in health care and government, which accounted for nearly 3 in 4 jobs created in June. Construction, transportation and finance also added positions, though there were job losses in retail, manufacturing and professional and business services — a catchall category that includes many white-collar positions.
“There’s broad evidence that we are seeing a downshift in the economy,” said Kathy Bostjancic, chief economist at Nationwide Mutual. “We’re seeing slowdowns across the board, but it’s too early to tell right now whether we’re going toward a ‘soft landing’ or a bumpier, harder landing.”
The June jobs figures reflect a cool-down from hiring in May, which the Labor Department revised downward significantly to 218,000 new jobs from an earlier report of 272,000, the agency said. April was also revised down to just 108,000 job gains, from 165,000, the lowest figures back to last October.
The gradual slowdown in the labor market could buoy hopes for a Federal Reserve rate cut in the months to come, reinforcing other signs of a slowdown in hiring, job postings and wage growth.
“The labor market is still strong but not quite as strong as it was a year ago,” said Gus Faucher, chief economist at PNC. “If we see a bit slower job growth, a little bit of cooling competition for workers, slightly less wage growth, that should help get inflation back to the Fed’s 2 percent target.”
Inflation, at 3.3 percent, has come down dramatically from its peak of 9.1 percent two years ago but remains higher than the Fed would like. Wage growth in particular, which can drive prices higher, has been a key focus for the central bank.
Overall, wages were up 0.3 percent from May, and 3.9 percent in the past year, further assuaging concerns that inflation could flare up again. Fed Chair Jerome H. Powell this week said the labor market is “cooling off appropriately.”
“It doesn’t look like it’s heating up or presenting a big problem for inflation going forward,” Powell said at the European Central Bank’s annual meeting Tuesday. “It looks like it’s doing just what you would want it to do, which is to cool off over time.”
Marcelino Bautista applied to more than a 100 jobs before he finally found one last month, as a systems programmer for a grocery store in Hilo, Hawaii. The 31-year-old graduated from college in May after six years in the Marine Corps.
“Finding a job was more stressful than I expected,” he said. “I applied for everything, even internships, but it was extremely competitive.”
