US rate hike talk cools on softer jobs data

The June US jobs report led with a softer-than-expected non-farm payroll growth number of 57,000 (consensus 113k) with 74,000 downward revisions to the past two months. The unemployment rate dipped to 4.2% from 4.3%, but this was primarily caused by a big drop in the participation rate to 61.5% from 61.8% – ie not a good reason since it highlights worker disengagement. In fact, the details show the number of people employed falling by half a million, while the number of people unemployed fell 213k, meaning more than 700k left the workforce. Worryingly, the bulk of the pain was seen in prime age workers – those aged 25–54 – where the participation rate fell from 83.9% to 83.3%. Wage growth was in line at 0.3% month-on-month or 3.5% year-on-year.

In terms of non-farm payrolls, the private sector was particularly subdued, rising only 49k, with private education/healthcare services yet again the only source of strength, rising 69k. This sector has cumulatively accounted for 70% of all the jobs created in the United States since December 2022 – a remarkable degree of job concentration. Leisure and hospitality has been another key sector for job creation in recent years, but not in June. Employment fell 61k, which is a major surprise given the World Cup is on and bars and the venues themselves are busy. Employment in this sector had increased by 44,000 in May, so it may be that business owners had thought there might be even more excitement about what was going on and have been left disappointed.