Employers in the US add 372,000 jobs in a sign of resilience

Employers in the United States shrugged off high inflation and weakening growth to add 372,000 jobs in June, a surprisingly strong gain that is likely to prompt the Federal Reserve to keep raising interest rates to cool the economy and curb price increases.

The unemployment rate in June stood at 3.6% for the fourth consecutive month, the Labor Department said on Friday, matching a nearly 50-year low that was reached before the pandemic struck in early 2020.

Last year’s strong hiring streak has been good for job seekers and has led to higher wages for many employees. But it also helped fuel the highest inflation in four decades and increased pressure on the Federal Reserve to further cut lending and spending.

Many employers are still struggling to fill jobs, especially in the economy’s vast service sector, and Americans now travel, eat out and attend public events much more frequently. The Fed may view June’s job creation as evidence that the rapid pace of hiring is fueling inflation, as companies raise wages to attract workers and then raise prices to cover their higher labor costs.

The Fed has already embarked on its fastest series of rate hikes since the 1980s, and further major hikes would make borrowing much more expensive for consumers and businesses and increase the risk of a recession.

The persistent desire of many companies to hire and grow provides a bulwark against the likelihood of the economy slipping into recession over the next year. Even if a recession does happen, last year’s healthy job and wage growth could help keep it relatively short and mild.

For now, there are about two job openings posted for every unemployed worker. And the number of people seeking unemployment benefits, a predictor of layoffs and an early indicator of a recession, remains well below historical averages, though it has risen recently.

At the same time, economic growth has been negative for two consecutive quarters, consumers are cutting back on spending with inflation at a four-decade high, and home sales have fallen as the Federal Reserve has raised borrowing costs. .

And hiring could weaken in the coming months. The Fed wants job growth to slow, at least modestly, as part of its strenuous efforts to cool the economy and curb high inflation. The Biden administration has also tried to cast any hiring pushback as part of a welcome transition to a more sustainable economy that will help keep inflation low.

But the transition to a more sustainable pace of growth and hiring is likely to be bumpy. If, for example, the Fed’s rate cuts end up slowing growth too much, as many analysts fear, the economy could slip into recession next year. Signs of a slowdown are already evident. In May, consumer spending, adjusted for inflation, fell for the first time since December. Existing home sales are down nearly 9% from a year ago.

And some companies are announcing layoffs or have paused hiring. In particular, several large retailers, including Walmart and Amazon, have said they overhired during the pandemic, with Walmart downsizing due to attrition.

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