The Line: 206,000 Jobs Added in June

3 Min Read

Another first Friday gives us another jobs report to digest. And just like last month, this one isn't as good as it seems. Let's start with the facts:

206,000 Jobs Added in June

So far so good, as that number was slightly higher than the Dow Jones forecast of 200,000. Here are the rest of the highlights:

  • The unemployment rate rose from 4.0% to 4.1%, while economists had expected no change.

  • Wages rose 0.3% in June and were 3.9% higher than a year ago, both in line with estimates.

  • Government employment jumped 70,000 in June, the highest job growth for any industry.

  • According to the household survey, all of last month's job growth was in part-time jobs.

  • Job growth was revised down by 57,000 in April and 54,000 in May, a total reduction of 111,000.

Remember last month, when we warned that the May jobs report wasn’t as good as it seemed due to data in the household survey? Turns out we were correct, as the May job gain was revised down to from 272,000 to 218,000. April’s data was revised down by even more, from 165,000 to 108,000. The moral here is to not get too happy about economic data, as it is always revised.

Enough of the gloating—although I love to do it—let’s get to what this all means.

Job growth is slowing. Yes, there were 206,000 jobs added last month, but remove the 70,000 created by the government and the number doesn’t look so good. And with the big downward revisions in April and May, don’t be surprised if June’s number is revised down sharply.

Even though the unemployment rate is still very low at 4.1%, it has risen each of the past three months to its highest level since November 2021. Wage growth is also slowing, and the median duration of unemployment rose to 9.8 weeks in June, up from 8.8 weeks a year ago. These are all signs of a cooling labor market, which should bring lower inflation in the coming months.

Wall Street looked at the rising unemployment rate and downward revisions to the prior two months' job gains as signs the Fed will start cutting rates soon. In fact, the chief economist of Goldman Sachs said that on Friday he expects a rate cut in September. Futures markets agree with him and have raised the odds of a 0.25% cut in September to 77%. This made the stock market so happy that both the S&P 500 and Nasdaq closed at record highs on Friday.

I still think it’s still too early for rate cuts, but who am I to spoil the party?