Labor Market Added 372,000 Jobs In June As Layoffs And Recession Fears Grow
The U.S. labor market—one of the economy’s strongest pillars during the pandemic recovery—added back 372,000 jobs in June, performing better than economists projected amid concerns the Federal Reserve’s efforts to combat inflation will plunge the economy into recession and push unemployment up for years.
Job gains in June far surpassed the roughly 250,000 new jobs economists had forecast but fell short of the revised estimate of 384,000 new jobs added in May, according to data released Friday by the Labor Department.
Growth was most pronounced in the professional and business services, leisure and hospitality, and health care industries, the government said.
Despite the gains, the unemployment rate remained flat at 3.6% for the fourth month in a row—falling short of the prepandemic rate of 3.5% in February 2020, when unemployment was hovering at its lowest level since 1969.
The monthly jobs report comes one day after career services firm Challenger Gray reported U.S. employers announced 32,517 cuts in June, surging nearly 59% from one year prior and marking the worst showing since February 2021 thanks to an uptick in cuts across the real estate, automobile and media industries.
Also on Thursday, the Labor Department reported 235,000 people filed new jobless claims last week—jumping 4,000 from the prior week to the highest level in six months.
After losing more than 20 million jobs at the height of pandemic uncertainty in the spring of 2020, the labor market has quickly and forcefully led the economic recovery. However, prolonged inflation and the threat of rising interest rates, which tend to hurt company earnings, have sparked concerns about the broader economy. The gloomy sentiment has ushered in waves of layoffs among recently booming technology and real estate companies, and corporate giants including Amazon and Walmart have both signaled a slowdown in their hiring needs, with Walmart executives pointing to “overstaffing” as a drag on disappointing profits last quarter.
“Many of the sectors increasing layoffs this year are currently dealing with the housing market downturn, as demand for mortgages dries up and financing becomes more difficult and expensive to obtain,” Andrew Challenger, senior vice President of Challenger, said Thursday. “Technology companies are also cutting workforces as inflation and recession concerns deepen. Some firms are offering voluntary severance or, as is the case with companies like Meta and Tesla, creating environments where workers may want to quit.”
What To Watch For
Economists at S&P Global Ratings last week warned the likelihood of a recession over the next year is increasing as the Federal Reserve embarks on its most aggressive economic tightening cycle in decades to combat rising inflation. They predict the unemployment rate will rise to 4.3% by the end of 2023 and more than 5% by the end of 2025—potentially wiping out job growth since last year.
What To Watch For
“It’s never a good thing to see layoffs, but the pressure on wages may have now peaked,” Jamie Cox, managing partner for Harris Financial Group, said in emailed comments after Thursday’s data. “ A few more weeks of these types of numbers and maybe, just maybe, financial conditions are tight enough to allow the Fed to throttle back on the scale of rate increases.”