June Jobs Report Could Mean Lower Interest Rates Soon, Or Panic In Streets

How about a big yummy cake? Plague of frogs?

Professor Prettypaws, doing his best to sort it all out. Image generated by DreamStudio AI, details in Photoshop

The US economy persisted in adding jobs in June, with 206,000 new non-farm jobs, according to the monthly report from the Labor Department. That was a little higher than the Dow Jones forecast of 200,000, but a decline from the revised May jobs figure of 218,000 new jobs. The number for April was also revised downward by 57,000, meaning that the last three months represent a slightly cooling jobs picture that could convince the Federal reserve that inflation has slowed enough to reduce interest rates.

The unemployment rate nudged up a tenth of a percent to 4.1 percent, breaking a string of 30 months with unemployment at 4 percent or under, the longest since the 1960s. As Economic Policy Institute senior economist Elise Gould pointed out on Twitter, the slight increase was “largely due to an increase in labor force participation, as more workers sought jobs. Employment increased as the employment-to-population rate held steady.”

As the New York Times explains,

April, May and June are now officially the weakest three-month stretch of job growth in Biden’s presidency. Today’s numbers, including revisions, show average job gains during that stretch were a bit under 180,000 per month.

To be clear, 180,000 jobs per month is still a historically strong pace with an unemployment rate this low. It’s more than the economy was averaging for most of 2019, under former President Donald J. Trump, for example.

Let’s also recall that the number of jobs lost in the pandemic had all been recovered by June of 2022, despite the favorite Republican lie that new jobs during Joe Biden’s presidency have only replaced pandemic losses. In the recent debate, Donald Trump repeated it again, because without all the lies, Republicans would have to acknowledge the economy is growing far better under Biden.

As Gould says in her Twitter thread, it’s darn well about time for the Fed to recognize that “we are not in a hot labor market,” a conclusion she backs up by noting that

Nominal wage growth for all private-sector workers rose 3.9% over the year, continuing its steady deceleration. As inflation falls faster than nominal wage growth, workers see their real wages rising. For over a year, average real wages have grown, increasing living standards.

And for once, the economist of the month in CNBC’s story on the jobs report is rationally non-exuberant; TradeStation global head of market strategy David Russell tasted the jobs report porridge and proclaimed,

“The job market is bending without yet breaking, which boosts the argument for rate cuts. […] Things are not too hot and not too cold. Goldilocks is here and September is in play” for a Fed rate cut.

Stocks were up a bit on the news, although of course the stock market can be as flighty and inconsistent as a lunchroom full of middle-schoolers, so the more important question will remain what the Fed actually does. A September rate cut would certainly be welcome news for Democrats going into the election, although Republicans would no doubt continue lying that the US is in the worst economic shape in history.

Oh, also, the Times points out that summer jobs for teenagers are suddenly a thing again, with 37.3 percent of 16-to-19-year-olds having jobs in June, which is the highest teen job rate since 2007. However, “that pales in comparison to the record of 55.3 percent in June 1978,” which I’m pretty sure is when I got my first restaurant job and quit when they moved me from busboy to dishwashing, so no telling how that affected the economy. Sorry, President Carter.

[Bureau of Labor Statistics / CNBC / NYT]

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