RATE HOPES RISE
Job growth slows
The rate of job growth moderated in June while May figures were revised downward — a trend that Wall Street analysts view as a positive sign that the Federal Reserve will slash interest rates later this year.
Nonfarm payrolls rose by 206,000 jobs in June — ahead of the 190,000 jobs economists expected but below the growth rate seen in previous months this year, the Labor Department said on Friday.
The feds also revised May jobs figures from the reported 272,000 jobs down to 218,000. For April, the government also revised the job figures downward — from the initial 165,000 to 108,000.
The signs of a weakening job market boosted investors’ hopes for rate cuts, although stocks were little changed in early trading.
The unemployment rate ticked up to 4.1%, slightly ahead of economists’ predictions for a 4% increase.
Neil Dutta, an analyst at Renaissance Macro Research, urged the Fed to “get on with” slashing interest rates.
“Today’s employment report ought to firm up expectations of a September rate cut,” Dutta told Bloomberg News. “Economic conditions are cooling and that makes the trade-offs different for the Fed.”
Investors have been hoping for news that would encourage the Federal Reserve to slash interest rates in its drive to fully tame inflation.
From the Fed’s perspective, a deceleration in hiring to a still-decent pace would be just about ideal.
It would suggest that the job market is slowing enough to ease pressure on employers to sharply raise pay, which could feed inflation, yet not so much as to cause waves of layoffs.
That said, economists have been repeatedly predicting that the job market would lose momentum in the face of high interest rates engineered by the Fed, only to see the hiring gains show unexpected strength.
“The labor market has really proven the doubters wrong,’’ said Andrew Flowers, chief economist at Appcast, which uses technology to help companies recruit workers.
Signs of slowdown
Still, Flowers suggested, the much higher borrowing costs caused by the Fed’s rate hikes will eventually weaken the job market.
“Eventually,” he said, “it’s going to bend, but not break. The slow bite of high interest rates is going to moderate job growth.’’
Already, there are signs of an economic slowdown. The US gross domestic product — the total output of goods and services — grew at a lethargic annual pace of 1.4% from January through March, the slowest quarterly pace in nearly two years.