Job report weakest since 2021
San José, CA – On Friday, July 5, the Department of Labor released its monthly employment report for the month of June. While mainstream news sources such as the Associated Press described the labor market as “healthy” the report was riddled with warning signs of a weaker jobs market.
While the survey of businesses reported 206,000 net new jobs in June, the job creation for both May and April were revised down by more than 50,000 each. This left the second three months of the year (April, May, and June) with the lowest average job creation since 2021.
In addition, in the survey of households that is part of the same jobs report, only 116,000 more people were employed, implying that many of the new jobs are part-time jobs and more people are working more than one job to make ends meet. While the two surveys rarely match up, this continues the string of much weaker reports from households. In May, households reported 408,000 fewer people working even as the survey of businesses said that there were 218,000 net new jobs.
The unemployment rate also ticked up to 4.1% from 4% in June. The three-month average also rose to 4%, a 0.4% increase from the recent three-month low of 3.6%. This is very close to 0.5% rise that has shown itself to be a reliable predictor of a coming recession. This is also the first time that the unemployment rate has been above 4% since 2021.
Another sign of weakness was the increase in wages, which was only 3.9% from a year ago. This is the lowest rate of increase since 2021. While it is likely to be higher than the rate of increase of prices as measured by the Consumer Price Index (CPI) report coming out this coming week, the CPI and other measures of inflation do not include interest rates, which are at the highest level in decades. The interest rates on a standard 30-year mortgage are the highest in more than 20 years, as are car loans. Credit card interest rates, at over 22%, are at record highs for the 30 years of data.
This past year hotel and restaurant, health care, and government made up most of the job gains. But in June hiring at hotels and restaurants almost came to a standstill, with only 7,000 net new jobs. There was also a loss of almost 50,000 temporary jobs. Businesses often will cut temp workers at the first signs of sales weakness.
While the unemployment rate for whites was the same from May to June, at 3.5%, it jumped the most for Asian American workers, whose unemployment rate jumped by a whole percentage point. The unemployment rates for women and African Americans also went up, by 0.3% and 0.2% respectively.
Despite the signs of weakness, all the major stock market indices rose in the hope that the signs of weakness will prompt the Federal Reserve to begin to cut interest rates in September. Investors have bought into the story of a “soft landing” where inflation slows without a recession. Despite the fact that this almost never happens, investors have convinced themselves that “this time is different.”