5 Experts On June Jobs Surprise: Data 'All But Ensures' Fed Rate Hike, Says 1 Economist

The latest data on nonfarm payrolls (NFPs) in June delivered a surprise Friday as the figure came in at 209,000, missing economist expectations of 225,000 jobs. This marks the lowest print since December 2020 and a notable decline from May’s revised figure of 306,000, signaling a softening of employment momentum last month.

The unemployment rate decreased as predicted, reaching 3.6% in June and remaining only 0.2 percentage points above a five-decade low.

Salary growth rose unexpectedly, as average hourly wages showed a 0.4% month-over-month increase, surpassing expectations of 0.3%, while annual wage growth stood at 4.4%, above the 4.2% expected.

In terms of stock reactions, small-cap stocks in the iShares Russell 1000 ETF IWB rose 0.7%, outperforming large caps in the SPDR S&P 500 ETF Trust SPY, down 0.1%.

Following the release of the jobs report, economists weighed in on the implications of the data:

Quincy Krosby, chief global strategist for LPL Financial, acknowledged that NFPs fell below consensus estimates but still indicate a resilient labor market. The unemployment rate at 3.6% will continue to keep the Fed in play for additional rate hikes, he said. Krosby highlighted the importance of next week’s CPI report in determining whether inflation is decreasing at a satisfactory pace for the Federal Reserve’s future rate hike decisions.
Jeffrey Roach, chief economist for LPL Financial, focused on the increase in average hourly earnings, which grew at a faster rate than expected. Roach said that wages are running “too hot for central bankers trying to quell inflation.” The market for blue-collar workers remains extremely tight as businesses appear desperate to attract and retain workers. “The latest jobs report all but ensures the Fed will increase rates later this month,” Roach said.
Adam Crisafulli, Vital Knowledge Media LLC founder, emphasized that the headline NFP figure, although lower than the ADP report, indicates decent job creation and is unlikely to significantly impact the Fed’s outlook. The expert noted that private job creation was relatively weak at 149,000, the prior months’ revisions were negative and wages ran hotter than expected, which he said suggests a combination closer to the “stagflation” end of the spectrum.
Dave Gilbertson, labor economist at UKG, said that while job growth might not be as explosive as in May, it is still healthy and reflects a stable labor market. He highlighted the continued demand for labor in sectors such as retail, hospitality and health care, and said the balance of power favors the blue-collar workforce.
Joseph Brusuelas, chief economist at RSM US LLP, tweeted that a remarkable streak of robust monthly job gains continued in June, with the economy creating 209,000 new jobs and the unemployment rate standing at 3.6%. Total employment has increased by 1.77 million in 2023, with the economy creating an average of 296,500 jobs per month.