The US economy added 209,000 jobs in June, a smaller increase than expected, but still lifted the unemployment rate to a solid 3.6%.
For the Pittsburgh region, whose numbers lag behind national data, the unemployment rate fell a tenth of a percentage point in May to a 47-year record low of 4.1%.
These figures are released monthly and it is easy for most people to get lost in the economic indicators.
So what do they mean? And why is the unemployment rate so closely linked to inflation and interest rates?
One takeaway: According to David Hand, a statistician with the Pennsylvania Department of Labor & Industry, it’s a good time to start looking for a job
“There are many positions that remain unfilled and there are not many people who could fill them,” he said. “It’s a tight job market.”
Due to the large number of retirements during the Covid-19 pandemic, some vacancies have arisen.
“We’ve been expecting this for a long time,” said Lauren Riegel, head of statistics at the Department of Labor and Industry. “In many areas of Pennsylvania we have older populations. So there’s a smaller pool of people to hire.
“It gives more power to people who are looking for work or who are employed. And it means employers have to do something to get people to work for them.”
On a national level, the publication of the June figures gives us an outlook for the first half of the year.
“The June jobs report will essentially conclude jobs for the first half of the year barring future revisions to the data,” said Mark Hamrick, principal economic analyst at Bankrate.com. “With all that has been inflicted on the economy, it is remarkable that job creation has been as solid as it has been and that the country’s unemployment rate remains so low. But given the rapid layoffs, it wasn’t without pain.”
Overall, more people are employed and looking for work, he noted.
In the first six months of the year, wage growth averaged 278,000 jobs per month, compared with around 399,000 a year earlier.
“Normally we wouldn’t be complaining about a pace of 209,000 job creations like in June,” Hamrick said.
“I think the broader conclusion is to try and get away from the very scrutiny – the labor market and the economy broadly turned out to be more sustainable than one might think given the fact that the Fed started raising interest rates in March last year started could have expected.” Hamrick said.
What does that mean for interest rates?
But it’s more complicated than just how many jobs are available and how many people are looking.
The Federal Reserve plans to keep raising interest rates to curb inflation.
The Federal Reserve wants to see an inflation rate of 2% per year. The current rate is about twice the target. However, inflation has fallen significantly from its peak of 9.1% last year.
The Fed tries to control inflation by influencing interest rates. If inflation is too high, the Fed can raise interest rates to slow the economy. When inflation is too low, interest rates can be lowered to stimulate the economy.
In a speech on June 29, Fed Chair Jerome Powell said: “Inflation has moderated somewhat since the middle of last year.” Nevertheless, inflationary pressures remain high and the process of bringing inflation back to 2% is still a long way off Away.”
Powell said rates could rise two or more times this year.
“The Fed would like a little more slack in the job market,” said Gus Faucher, chief economist at PNC Financial Services Group. “The Fed believes a weaker labor market would ease wage pressures in the economy and help bring inflation back to 2%.
“Looking at everything from that perspective, the Fed wants to see a little slower economic growth. First we see the economy slow down and then we see the job market slow down. Alternatively, when the economy picks up, it takes a couple of months for the labor market to recover because companies don’t want to hire new staff until they are sure that the stronger demand will continue.”
recession worries
Hamrick said that while the economy appears to have avoided a recession so far, certain sectors have experienced sharp slowdowns “in part due to the Fed’s tightening measures.”
“This includes technology, media/entertainment, manufacturing, shipping and the financial sector,” Hamrick said. “For people who have lost their jobs or lost their future prospects in these hardest-hit sectors, the question of a broader slowdown may seem academic.”
“The state of the economy, including the labor market, remains questionable until the end of this year,” he said. “If the anti-inflation Fed is forced to raise interest rates further, as it recently signaled, the risks of an economic downturn remain or even increase.”
Faucher notes that the strong job market and ongoing consumer spending have propelled the economy.
“But the Fed has been raising interest rates for a year and a half. We have not felt the full impact of these higher interest rates.
“My expectation is that we could see a mild recession later this year or early next year as higher interest rates impact the economy.”
Stephanie Ritenbaugh is a Contributor to Tribune-Review. You can contact Stephanie at [email protected].
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