U.S. Employment (June 2024)

Payroll gains decelerate in June, while unemployment rate ticks up to 4.1%

• Non-farm employment increased by 206k in June, slightly above market expectations for a gain of 190k. However, job gains for the prior two months were revised materially lower by roughly 111k jobs.
• Private payrolls rose 136k, with most of the gains concentrated in health care & social assistance (+82.4k) and construction (+27k).
• In the household survey, the increase in civilian employment (+116k) lagged the increase in the labor force (+277k), pushing the unemployment rate higher by 0.1 percentage points to 4.1%. Meanwhile, the labor force participation rate ticked up by 0.1 percentage points(ppts) to 62.6%.
• Average hourly earnings (AHE) were up 0.3% month-on-month (m/m) – one-tenth below May's gain. On a twelve-month basis, AHE ticked down to 3.9% (from 4.1% in May), with the three-month annualized rate falling 0.4ppts to 3.6%.

Key Implications

• Payroll growth remained solid in June, but sizeable revisions to the prior two months reduced the gain in the second quarter to 607k, marking a four-year low. This cooling is consistent with other labor market metrics which have shown that the hiring rate, quit rate, and job opening to unemployed ratio are all at or below their pre-pandemic levels. Softening fundamentals have now pushed the unemployment rate to a new cycle high of 4.1%, which outside of the pandemic has not been seen since early 2018.
• The resultant deceleration in average hourly earnings in June will be viewed favorably by the Federal Reserve as they look for signs of waning support to spending which would aid in cooling inflation. Chair Powell noted earlier this week that recent inflation reports have been encouraging, but that more confidence would be needed before the FOMC considers adjusting their monetary policy stance. June's employment report should bolster the Fed's confidence as we await the June CPI inflation report next week.

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