The U.S. economy added the fewest jobs in 2-1/2 years in June, but persistently strong wage growth pointed to still-tight labor market conditions that most certainly ensure the Federal Reserve will resume raising interest rate later this month.
The Labor Department's closely watched employment report on Friday also showed 110,000 fewer jobs were created in April and May, indicating that higher borrowing costs were starting to dampen businesses' appetite to continue boosting headcount. There was also a jump in the number of people working part-time for economic reasons last month, in part because their hours had been reduced due to work slack or business conditions.
"The labor market appears to be cooling but not fast enough to prevent another tap on the brakes from the Fed on July 26," said Sal Guatieri, as senior economist at BMO Capital Markets in Toronto. While the higher paying industries such as technology and finance are purging workers, sectors like leisure and hospitality as well local government and education are still catching up after losing employees and experiencing accelerated retirements during the COVID-19 pandemic.
Construction employment jumped by 23,000. The housing market is showing signs of revival after being battered by a surge in mortgage rates. The Fed has raised its policy rate by 500 basis points since March 2022 when it embarked on its fastest monetary policy tightening campaign in more than 40 years.
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