Hiring in U.S. Slows in June, But Labor Market Remains Resilient
Job growth in the U.S. eased in June. However, job growth remains resilient despite efforts by the Federal Reserve to dampen inflation. U.S. employers have now added jobs for the past 30 months.
The Fed has imposed 10 rate hikes since March 2022 which has taken the federal funds rate to a 16-year high of more than 5%. The pace of hiring is continuing to put upward pressure on wages and inflation. While the labor market outlook is uncertain, job growth remains above pre-pandemic levels, and unemployment remains among historically low rates.
Employers added roughly 209,000 employees to payrolls in June 2023, according to the Bureau of Labor Statistics (BLS). That was the weakest month-over-month gain since December 2020 when the U.S. recorded a decline in jobs. In addition, the nation’s recent job additions came in short of economist’s projections (225,000 to 240,000 jobs) and well below May’s gain of 306,000 jobs.
While recent job gains were below the monthly average of around 339,000 jobs added in 2022, employers are continuing to hire more workers than they did prior to the pandemic. From 2015 to 2019, the U.S. economy added an average of roughly 190,000 jobs each month. On an annual basis, the nation gained nearly 3.8 million jobs in June 2023. Although down from the annual gains recorded throughout much of 2021 and 2022, that was well above the average of around 2.4 million jobs added annually from 2015 to 2019.
Downward revisions to April 2023 data showed 77,000 fewer jobs were added than previously reported, down to 217,000 positions. The May 2023 growth number was also revised down, decreasing by 33,000 jobs to a total of 306,000 positions. With these revisions, employment gains in April and May combined were 110,000 jobs lower than previously reported.
The U.S. economy has recovered all the net jobs lost during the COVID-19 pandemic. As of June, the nation had roughly 3.8 million more jobs (+2.5%) compared to the pre-pandemic employment level from February 2020.
Jobs by Industry
Job growth in June was seen across most major industry sectors, but most notably in the Education and Health Services (+73,000 jobs) and Government (+60,000 jobs) sectors. Solid gains were also recorded in Construction (+23,000 jobs), Leisure and Hospitality Services (+21,000 jobs) and Professional and Business Services (+21,000 jobs). The only two industries to record job losses in June were Trade, Transportation and Utilities (-22,000 jobs) and Mining and Logging (-1,000 jobs).
Most major industries have recovered all the jobs lost during the COVID-19 pandemic downturn. Professional and Business Services has seen the best recovery, with today’s job count coming in more than 1.6 million positions ahead of February 2020 numbers. Trade, Transportation and Utilities is also well ahead of pre-pandemic norms, with employment up by roughly 1.1 million jobs.
Alternatively, some of the harder-hit sectors remain below pre-pandemic job counts. Despite recent gains, employment in the Leisure and Hospitality Services sector is still well below pre-pandemic employment counts, by roughly 369,000 workers. The Government sector is about 161,000 jobs behind February 2020 levels. Other industry sectors yet to recover all the jobs lost during the COVID-19 downturn include Other Services (-68,000 jobs) and Mining and Logging (-44,000 jobs).
The unemployment rate (U3 or headline unemployment rate which is seasonally adjusted) in June clocked in at 3.6%, down from the 3.7% rate in May. Since March 2022, the unemployment rate has been in a narrow range of 3.4% to 3.7%. At the onset of the pandemic, the unemployment rate climbed to 14.7% in April 2020. Prior to the pandemic, the unemployment rate clocked in at 3.5% to 5.7% from 2015 to 2019, averaging 4.4% during that period.
The total number of unemployed in the U.S. fell by 140,000 to roughly 6 million in June.
The unemployment rate for adult men decreased 10 basis points (bps) from May to June, falling to 3.4%. The unemployment rate for adult women dropped 20 bps, to 3.1%. Meanwhile, the unemployment rate for teenagers climbed 70 bps from 10.3% in May to 11% in June.
Average Hourly Earnings
Average hourly earnings among employees on private nonfarm payrolls rose $0.12 (+0.4%) from May to June. That monthly increase took average hourly earnings to $33.58 in June. On an annual basis, average hourly earnings were up $1.40, a 4.4% increase year-over-year. Overall wage growth is now keeping up with rising prices, as the Consumer Price Index (CPI) rose 4% in the year-ending May. The Fed’s target for inflation is currently at 2%.
Wage growth over the past year varied by industry. The largest increases in earnings from June 2022 to June 2023 were recorded among workers in Mining and Logging (6%), Leisure and Hospitality Services (5.6%), Manufacturing (4.9%), Trade, Transportation and Utilities (4.8%) and Construction (4.7%). The smallest increases were among employees in Information (3.2%) and Education and Health Services (3.3%).