The labor market added 372,000 jobs in June, the Labor Department reported this Friday, a lower number than that registered in the same month a year ago, but which still shows signs that economic growth remains solid despite fear to an imminent recession due to high inflation.
The unemployment rate in June remained at 3.6% for the fourth consecutive month, which may influence the Federal Reserve's policy of aggressive increases in interest rates to combat rising prices, a fundamental factor for those who fear that the economy headed for a crisis.
In June 2021, a greater number of jobs were created, but this occurred in the context of a vigorous economic recovery after the crisis of the COVID-19 pandemic.
The current context is totally different.
Economic growth has been negative for two consecutive quarters, while inflation reached its highest point in four decades and home sales have fallen as the Federal Reserve has raised borrowing costs.
Most of the new jobs were in professional and business services, leisure, hospitality and health care, according to the department.
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A hiring sign is displayed at a restaurant in Schaumburg, Ill., on Friday, April 1, 2022.Nam Y. Huh/AP
However, the data shows that many companies continue to hire, with roughly two jobs available for every unemployed worker.
And the number of people seeking unemployment benefits, a leading indicator of layoffs and an early indicator of a recession, remains well below historical averages, even though it has risen recently.
The Joe Biden administration has signaled that it is seeking to slow job growth, at least modestly, to cool the economy and curb high inflation.
Officials have tried to portray any setbacks in hiring as part of a welcome transition to a more sustainable economy that will help keep prices down.
That employment rises, but at lower numbers, "will be a sign that we are moving successfully into the next phase of recovery" that is "stable and steady," a senior White House official said Thursday.
The risks of a recession
However, the transition is likely to come with drawbacks.
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 reducing its headcount due to attrition.
Tesla is cutting about 3.5% of its total workforce.
Netflix has laid off some 450 employees after it reported a loss of subscribers for the first time in more than a decade.
Online car retailer Carvana and real estate companies Redfin and Compass have also announced job cuts.
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Federal Reserve Chairman Jerome Powell has held out hope that the economy will continue to expand even as the central bank raises borrowing costs.
But Powell has also acknowledged that foreign factors, such as the Russian invasion of Ukraine, which has raised gasoline and food prices, will make it harder to avoid a recession.
Last month, he admitted that a recession
"is not our intended outcome, but it is certainly a possibility
. "
How are the salaries?
Friday's jobs report for June also provides an update on median wage growth.
Wage increases have weakened in recent months, but are still at much higher levels than before the pandemic.
Smaller wage gains could also help moderate inflation.
It would reduce the pressure on businesses, particularly small businesses, which typically have smaller profit margins, to raise prices to cover their higher labor costs.
Over the past three months, the average hourly wage has risen at an annual rate of about 4.5%, down from the 6% pace at the end of last year.
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Economists will also closely watch the proportion of Americans who were working or looking for work in June.
That figure has risen substantially from a year ago, from 61.6% to 62.3%, but is still a percentage point below its pre-pandemic level.
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An increase in the number of people in the workforce would alleviate labor shortages and could make it easier for employers to fill jobs without having to offer significant wage increases.
Any such trend would help alleviate inflationary pressures.