June Jobs Figures Beat Expectations But Unemployment Rate Rises With Slower Wage Growth - A Mixed Bag For Interest Rates

The official June labor market report for the United States indicates mixed conditions, showing robust employment growth but a slowdown in wage increases, which may support expectations for upcoming interest rate cuts.

In June, the U.S. economy added 206,000 new jobs, a reduction from the downwardly revised 218,000 in May, according to data released Friday.

June’s Employment Situation: Key Highlights

• Nonfarm payrolls increased by 206,000 last month, slowing down by 12,000 from May, but above economist expectations of 189,000, with predictions ranging from 150,000 to 237,000.
• The unemployment rate ticked slightly higher from 4% to 4.1% against expectations of an unchanged reading.
• Wage growth showed signs of cooling. Average hourly earnings advanced by 0.3% on month-on-month basis, decelerating from May’s 0.4%, in line with expectations.
• Annually, average hourly earnings were 3.9% higher compared to June 2023, declining from May’s 4.1% and matching expectations.

Market Reactions

Before the June jobs report, traders had assigned a 73% chance of a Federal Reserve rate cut in September and factored in 52 basis points of cuts — implying two rate cuts — by the end of the year.

The cooler-than-expected labor market data increases the likelihood the Federal Reserve will reduce borrowing costs if inflation trends remain benign, to avoid an undue economic hurdle.

The market reacted positively to the June jobs report. The dollar and Treasury yields fell, indicating growing confidence in imminent interest rate cuts. Futures on major U.S. indices rose in Friday’s premarket trading.

On Tuesday, ahead of the Fourth of July market closure, major equity averages, as tracked by the Invesco QQQ Trust QQQ and the SPDR S&P 500 ETF Trust SPY, closed at record highs.

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