Private Sector Stumbles: June Job Growth Hits a Snail’s Pace at 150K
Staff Editor
2 min read
In a revealing turn of events, the ADP National Employment Report indicated that hiring by U.S. companies slowed more than anticipated in June. This unexpected deceleration points to a labor market that is gradually cooling off under the influence of higher interest rates. According to the data released on Wednesday, the economy added a meager 145,000 jobs last month, falling short of the 160,000 gain that economists surveyed by Refinitiv had predicted. This figure also reflects a decline from the revised 157,000 jobs added in May.
One of the more telling details of the report was the slight dip in wage growth, a key component driving inflation. Wage growth tapered to 4.9%, marking its slowest pace since August 2021. Workers who changed jobs saw their wages rise by 7.7%, a modest decrease from the 7.8% increase recorded in May. While these figures might sound like they belong in a financial version of Goldilocks and the Three Bears, the reality is far less whimsical.
The report shined a spotlight on the disparate fortunes within various sectors of the economy. Job growth was almost entirely concentrated in the services sector, which contributed the lion’s share of the gains. Meanwhile, goods producers were practically standing still, adding just 14,000 jobs to the total. Leisure and hospitality surged ahead, accounting for 63,000 new jobs, which lends credence to the notion that Americans are still more likely to spend their money on experiences rather than things. The construction industry also demonstrated vitality by adding 27,000 workers in June, while professional and business services contributed a gain of 25,000 jobs.
However, the labor market wasn’t all sunshine and rainbows. Certain sectors experienced notable declines, further highlighting the uneven nature of job growth. Natural resources and mining shed 8,000 jobs, while the manufacturing sector lost 5,000 positions. Such losses underscore the challenges facing high-paying job sectors. ADP’s chief economist, Nela Richardson, noted that job growth has been solid but not broad-based. She pointed out that without the rebound in leisure and hospitality hiring, June would have been a rather grim month for the labor market.
The tepid job report arrives amid an aggressive tightening campaign by the Federal Reserve, which has raised interest rates to their highest level since 2001. Wall Street is keenly observing the labor market for signs that it is finally cooling down. A softened labor market would provide the Federal Reserve with the leeway to pivot from raising interest rates to cutting them, a move eagerly awaited by businesses and investors alike.
As the labor market navigates this period of cooling, the implications are significant. White-collar workers, in particular, are finding it increasingly challenging to secure employment. With high-paying job opportunities becoming more scarce and wage growth ebbing, the economic landscape is shifting. Whether this cooling trend signals a temporary adjustment or a longer-term change remains to be seen. One thing is certain: the labor market is undergoing a noticeable transformation, and both workers and employers will have to adapt to the new dynamics at play.
