US hiring falls short of expectations in June, signalling cooling economy ahead of Fed decision

In June, hiring in the United States slowed down. As per a US Labour Department statement released on Friday, this signals a cooling of the American economy before an upcoming interest rate decision.

As per an AFP report, the figures fell below analysts’ expectations, providing some relief for the US Federal Reserve as it considers a return to interest rate hikes later this month that will help address persistent inflation above its long-term target of two per cent.

What the US Labour Department said

According to the Labour Department, the world’s largest economy added 209,000 jobs last month, a decline from the revised figure of 306,000 in May. However, the unemployment rate slightly decreased to 3.6 per cent, remaining close to historically low levels.

The number of new jobs created fell short of the median expectation of 240,000 in a survey conducted by MarketWatch, while the unemployment rate aligned with predictions.

However, despite the slowdown in job creation, experts believe that the Fed is unlikely to postpone another interest rate hike at its upcoming meeting.

Talking to AFP, Oxford Economics’ lead US economist, Oren Klachkin, said that “It’s a step in the right direction but we’re not near the level that we would need to see to be convinced that the labour market is significantly cooling down”.

Although job growth has eased, average hourly earnings increased by 0.4 per cent on a monthly basis and rose by 4.4 per cent annually.

‘Bidenomics in action’

President Joe Biden referred to Friday’s jobs report as evidence of his economic policies, stating that the economy added over 200,000 jobs in June, totalling 13.2 million jobs since he took office.

“That’s more jobs added in two and a half years than any president has ever created in a four-year term,” bragged Biden.

The employment growth primarily came from sectors such as government, healthcare, social assistance, and construction.

A hike in June is certain

Minutes from the Fed’s last rate decision revealed that several members of its rate-setting committee supported an interest rate hike in June to address high inflation.

AFP reports that while ultimately, the Federal Open Market Committee (FOMC) voted to pause the consecutive rate increases, it indicated the likelihood of two additional increases by the end of the year to bring inflation back down.

KPMG’s chief economist, Diane Swonk, said that the Fed is expected to raise rates by at least another half per cent before pausing, with a hike in July being highly probable. However, futures traders are reportedly assigning a nearly 95 per cent probability that the Fed will raise its base rate by a quarter percentage point at the upcoming meeting on July 25-26, as per data from CME Group.

(With inputs from agencies)

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