June Labor Report: Solid headline, details mixed

What happened?

The US economy added 206K jobs in June, just above consensus expectations. However, that data point was overwhelmed by large downward revisions to the prior two months’ hiring data—bringing the total new employment in those months down by a combined 111K jobs. In addition, the unemployment rate ticked up slightly from the prior month, rounding up to 4.1% (versus 4.0% in May and expected for June). On the whole, that weakens the data slightly. However, net hiring in May and June remained well above 200K jobs/month and thus still well above the steady state inflow of employees into the labor market. As a result, we don’t think it changes the picture that dramatically. The labor market remains sound and deceleration remains modest.

In addition, wage growth has been easing, now down to 3.9% year-over-year (vs. 5.9% in March 2022). We’d still see that in the current context as a good sign which should lead to an ongoing cooling in services inflation as opposed to a bad sign of a weakening economy.

Implications for the Fed

This latest data does add to the case for a first rate cut in September. We see that FOMC meeting as a “live” one—the Fed could start to ease then; however, we think that it will require a very significant slowing of inflation in the summer data for that to occur. As such, we think it’s premature to assume such an outcome and rather remain comfortable with a forecasted first cut in the fourth quarter. Investing involves risk, including loss of principal invested.  This information does not constitute an offer or solicitation and should not be relied upon as investment or financial advice or a recommendation of particular courses of action for all investors. Equitable Advisors, LLC and its affiliates and associates do not guarantee the accuracy or completeness of any statements, statistics, data, opinions, forecasts, or predictions offered herein.