Is the big slowdown in hiring finally here? June U.S. jobs report not supposed to show it.

By Jeffry Bartash

Wall Street forecasts 200,000 new jobs and 4% unemployment

The U.S. economy wasn't supposed to churn out so many new jobs this year, according to the experts. But lots of businesses have been hiring to underpin a solid economic expansion.

Is the dam finally about to break? Here's what to watch for in the June U.S. jobs report due Friday morning.

The forecast

The economy is forecast to add 200,000 jobs in June, down from a preliminary 272,000 in the prior month.

Even if hiring slowed, as predicted, such an increase would still be pretty good historically. The economy added an average of 183,000 new jobs a month in the decade prior to the pandemic.

Doubts creeping in

Not everyone believes it.

The government's employment survey has been less accurate since the pandemic, noted Richard Moody, chief economist of Regions Financial.

As a result, the initial estimate of new jobs has been prone to be too high. Later revisions tend to show fewer jobs were actually created.

"We do not think the labor market to be as vibrant as implied by the headline job growth prints," Moody said.

Other economic surveys also suggest hiring may have slowed.

ADP reported the smallest increase in private-sector jobs in five months, for one thing.

The employment index of the ISM service index was negative in June for the fifth month in a row.

And the number of people collecting weekly jobless benefits has risen to three-year high, suggesting it's taking longer for people who lose their jobs to find new ones.

Unemployment

A rising unemployment rate is another measure that suggests the labor market is cooling off.

The jobless rate climbed to 4% in May for the first time in 28 months from as low as 3.4% just a little over a year earlier.

In June, the unemployment is expected to hold steady at 4%.

The rise in the jobless rate, however, may be less than meets the eye.

How come? The biggest increase has been among young workers between the ages of 16 and 24, whose employment status is harder for the government to capture.

The jobless rate for that group jumped to 9.2% in May from 7.3% in January.

By contrast, the unemployment rate of workers in their prime is the same as it was in January: a low 3.3%.

These workers are from 25 to 54 years of age and are likely to be raising families. So long as they have jobs, the economy would appear to be in decent shape.

Wages

Average hourly wages are projected to increase 0.3% in June and that's still too high for the Federal Reserve. Wages tend to rise 0.1% to 0.2% a month in a low-inflation climate.

The increase in the wages in the past year, however, could slow to 3.9% from 4.1% and touch the lowest level in three years.

The Fed views annual wages increases of 3% or less as consistent with low inflation.

Fed reaction

Central bank officials would like to see the labor market cool down further. High demand for labor after the pandemic and the resulting surge in worker pay complicated the Fed's effort to get inflation under control.

Yet if the main barometers of inflation continue to trend lower, as they did in May, the Fed would be primed to cut interest rates as early as September.

Another strong jobs report would not necessarily dissuade them. A weaker one would support the case for a rate cut.

-Jeffry Bartash

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07-05-24 0155ET

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