June Jobs Report: Job Market Keeps On Keeping On

The latest jobs numbers are out from the U.S. Bureau of Labor Statistics. What do they mean for job seekers, employers and investors? Here’s a quick take from Glassdoor Senior Economist Daniel Zhao.

The job market held strong in June, even as the broader economy slows, and recession fears start to rise. Employers added 372,000 jobs in June, down only modestly from the 384,000 jobs added in May. The unemployment rate was flat again, holding at 3.6 percent for the fourth month in a row. The labor market remains a bright spot in the recovery, and the June jobs report reiterates that even as the labor market takes its foot off the gas, it’s still coasting along at a steady pace.

Jobs Growth Slowed Only Modestly

Jobs growth fell to 372,000 jobs added in June, beating expectations. Q2 2022 job gains averaged about 375,000, clearly slower than Q1 which averaged 538,000. June’s jobs report shows the labor market is shifting to a lower gear, though for context, in 2019’s hot job market, job gains averaged only 164,000 per month. The modestly slower pace we’re seeing now is not a cause for concern if the pace can be maintained. The question remains whether we’ll see jobs growth continue to slow or stabilize at a more sustainable pace.

Broad-Based Job Gains Across Industries

The strongest job gains in June were in health care & social assistance (+77,800 jobs added) and professional & business services (+74,000). Even with concerns about layoffs in tech and finance, professional & business services and information (+25,000) both continued to show strong job gains. Despite concerns that consumer spending is rotating back towards pre-pandemic patterns and away from goods to services, employment growth was still strong across retail (+15,400), transportation & warehousing (+35,500) and leisure & hospitality (+67,000).

Unemployment Flat at 3.6 Percent Again

The unemployment rate stayed flat at 3.6 percent for the fourth month in a row as the labor market struggles to push the unemployment rate below its already low rate. However, labor force participation did step back in June, ticking down to 62.2 percent in June from 62.3 percent in May. The drop was in part driven by a reversal in labor force gains for Black workers; Black labor force participation dropped to 62.2 percent, returning to April’s levels after a spike in May. While the unemployment rate is still holding at a low level, if the economy slows significantly, today’s unemployment rate may be the lowest rate we see during this business cycle.

Wage Growth Cools

Average hourly earnings grew 5.1 percent year-over-year in June, down from 5.3 percent in May, in a sign that inflationary pressures are not becoming entrenched. Inflation still largely appears to be due to pandemic supply chains disruptions and the Russian invasion of Ukraine. Cooling wage growth combined with higher supply-induced inflation, however, highlights the challenge facing the Fed, whose policy tools are blunt instruments ill-suited to target supply chain disruptions and oil shocks.

Conclusion

The job market is still plowing forward even in the face of increasing headwinds and recession fears. Even if the economy is slowing, the labor market remains a point of strength for the recovery. Strong employer demand is supporting solid but slowing job gains. As policymakers fight to tamp down inflation, the economy is likely to slow in coming months, but for the time being, this does not look like a labor market teetering on the edge of recession. Ultimately, the labor market has still got clear skies even if the forecast calls for rain.

More Insights

Job gains cooled only modestly in June, beating expectations. Job gains overall seem to have shifted into a lower gear in the last few months, but recall that in 2019's hot job market, monthly job gains averaged 164,000. This is still a healthy clip.

Most industries added jobs in June in broad-based gains across the board. A few industry stories:

1. Despite concerns about rotation from goods to services, job gains returned in retail (+15,400) and held strong in leisure & hospitality (+67,000).

2. Despite the housing market slowdown, job gains in related industries were maybe muted, but we didn't see large job losses. Construction added 6,000 jobs and real estate added 3,700.

3. Despite reports of prominent layoffs, tech industries like information (+25,000) and computer systems design & related services (+10,000) saw job gains in June.

With the steady progress in June, payrolls are within striking distance of pre-pandemic levels, just over half a million away. Despite slowdown fears, that milestone is still within reach if we get another 2 months of solid jobs growth.

Wage growth is cooling: Average hourly earnings growth slowed to 5.1 percent year-over-year. Wage growth has slowed even more in recent months, growing at just a 4.2 percent annualized pace over the last quarter and a 3.8 percent annualized pace in June.

The unemployment rate was flat at 3.6 percent in June, for the fourth month in a row. The picture in June, however, is different from recent months bc of the backdrop of falling labor force participation in June...

The labor force participation rate ticked down to 62.2 percent from 62.3 percent, and that picture looks even worse for prime-age (25–54) workers where the participation rate dropped 0.3 percentage points, reversing 3 months of gains.

The drop in labor force participation was in large part driven by a decline for Black workers who saw labor force participation fall back after jumping in May. The Black unemployment rate did drop, but you don't want to see that happening with falling labor force participation.