The economy added 209,000 jobs in June, slowing from the previous month. Still, wage growth remains resilient, and unemployment continued to trend near a 50-year low, according to the latest employment report from the Bureau of Labor Statistics (BLS).
June's job growth was seen across several industries, primarily driven by government, health care, social assistance and construction jobs, according to BLS.
At the same time, the BLS announced that job growth for the previous two months was revised downward by a total of 110,000 jobs, with 306,000 jobs added in May and 217,000 in April.
The net increase of just 99,000 lowered the 3-month average to 244,000 from a previously reported 283,000 for the three-month period ending in May, according to Jim Baird, Plante Moran Financial Advisors chief investment officer.
The unemployment rate in June changed little at 3.6%, edging down from the 3.7% recorded last month, and the number of unemployed people in the country remained at roughly 6 million. The unemployment rate has ranged from 3.4% to 3.7% since March 2022, according to the BLS.
Wage growth increased by 0.4%, slightly above the 0.3% growth in the previous month. Over the past 12 months, average hourly earnings rose by 4.4%.
"The jobs market isn't nearly as brisk as it was over the past few years, but even the sharp slowdown in job creation hasn't been enough to push the unemployment rate meaningfully higher – a key ingredient to the Fed's recipe to bring inflation back down to its 2% target," Baird said in a statement. "The 'long and variable lag' in monetary policy notwithstanding, there's not yet been enough evidence in the hard data to convince policymakers that enough has been done to arrest inflation."
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The question now is how will the Federal Reserve proceed? Last month the central bank announced a much-awaited pause on its interest rate hikes but has since indicated that persistent inflation could push it to pull the trigger on further rate hikes this year.
June's jobs report all but seals the suspicion that the Fed will proceed with another interest rate increase at its upcoming July meeting.
"While job growth and wage growth are trending down, both are still well above the pace that would be consistent with the Federal Reserve's inflation target," the Mortgage Bankers Association senior vice president and chief economist Mike Fratantoni said in a statement. "We now expect that the FOMC will raise the federal funds target another 25 basis points at its July meeting."
Resilient wage growth is likely to worry Fed officials the most, according to NAFCU Chief Economist and Vice President of Research Curt Long. A recent Morning Consult report said that workers increasingly feel they have more leverage to get a raise from their employer, which could pressure wage growth and make the Fed's job to curb inflation harder.
"A rate hike later this month is almost assured, and at least one additional hike after that is highly likely," Long said in a statement.
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For housing, the prospect of future interest rate hikes could disrupt the market's nascent recovery. The average 30-year fixed-rate mortgage increased to 6.81% for the week ending July 6, according to Freddie Mac's latest Primary Mortgage Market Survey. That's up from the previous week when it averaged 6.71%.
"Employment data suggests that households continue to be in a good economic position and can approach purchases of small and bigger-ticket items like housing with some confidence," Realtor.com Chief Economist Danielle Hale said in a statement. "Nevertheless, still high and climbing mortgage rates present a significant affordability hurdle for both first-time and trade-up homebuyers reliant on financing to make a home purchase.
"Affordability challenges have significantly slowed home purchases and are also weighing on home and rental prices, Hale continued. "Looking at the totality of the data, the Fed is likely to conclude that additional rate hikes are needed in the months ahead to fully wring inflation out of the economy. This means additional challenges are ahead for housing and homebuyers and sellers."
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