U.S. employers had another healthy month of hiring in June, adding 206,000 jobs and once again showing the U.S. economy’s ability to withstand continued high interest rates.
Last month’s job growth marked a retreat from May’s 218,000. But it was still a strong gain, reflecting the resilience of the U.S. consumer-driven economy, which is slowing but still growing steadily.
Friday’s Labor Department report also showed the unemployment rate rose to a still-low 4.1 percent from 4 percent. And the department sharply revised down its estimate for job growth for April and May by a total of 111,000.
The state of the economy weighs heavily on voters’ minds as the presidential campaign heats up. Despite steady hiring, relatively few layoffs and a gradual cooling of inflation, many Americans have grown exasperated by still-high prices and blame President Joe Biden.
Economists have repeatedly predicted that the labor market would lose momentum in the face of high interest rates engineered by the Federal Reserve, only to see hiring gains show unexpected strength. Still, there are signs of an economic slowdown in the face of the Fed’s series of interest rate hikes. U.S. gross domestic product — the total output of goods and services — grew at a lethargic 1.4% annual pace from January through March, the slowest quarterly pace in nearly two years.
Consumer spending, which accounts for roughly 70% of all U.S. economic activity and has driven the expansion over the past three years, rose at a pace of just 1.5% last quarter after growing more than 3% in each of the previous two quarters. In addition, the number of announced job openings has declined steadily since hitting a record high of 12.2 million in March 2022.
Still, while employers may not be hiring as aggressively after struggling to fill jobs over the past two years, they are not cutting many either. Most workers enjoy an unusual level of job security.
Over 2022 and 2023, the Fed raised its benchmark interest rate 11 times to try to beat the worst stretch of inflation in four decades, raising its key rate to its highest point in 23 years. The resulting punishingly higher borrowing rates, for consumers and businesses, were widely expected to trigger a recession. They didn’t. Instead, the economy and labor market have shown surprising resilience.
Inflation, meanwhile, has declined steadily from a peak of 9.1% in 2022 to 3.3%. In remarks this week at a conference in Portugal, Fed Chair Jerome Powell noted that price increases in the United States were slowing again after higher readings earlier this year. But he warned that more evidence that inflation is approaching the Fed’s 2% target level would be needed before policymakers cut rates.
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