Job creation slowed in June, despite continued tight labor market conditions, which economists say is good news for the Federal Reserve. Data from the U.S. Bureau of Labor Statistics released on Friday shows that total nonfarm payroll rose by 206,000 jobs in June, compared to 272,000 jobs in May.
Job gains in June were most notable in industries like government (70,000), health care (49,000), social assistance (34,000) and construction (27,000), a positive for the housing industry.
When broken out, the residential construction sector added 3,100 jobs month over month, while the number of residential specialty trade contractors rose 2,400 from a month prior. Overall, for the past year, the construction sector has added an average of 20,000 jobs per month.
The real estate and rental and leasing services sector added 1,100 jobs from May with real estate posting a 500-job gain and the rental and leasing sector gaining 800 jobs.
Despite the continuing job growth, unemployment rose slightly from May to 4.1% in June, with 6.8 million people unemployed. A year ago, the unemployment rate was 3.6% with 6 million people unemployed.
While economists noted that the month’s job gains were higher than anticipated, they highlighted that most of the jobs were in the government sector.
“Similar to May, the headline gain in nonfarm payroll employment data in June does not tell the entire story,” Mike Fratantoni, the MBA’s senior vice president and chief economist, said in a statement. “While the headline gain showed an increase of 206,000 jobs, more than one-third of that was a gain in government employment, largely a function of increases in state and local jobs. Although June’s increase was above our expectations, both April and May figures were revised down by a combined 111,000 jobs, marking the three-month average down to a 177,000 increase.”
Fratantoni also highlighted the rise in unemployment as an indicator that the job market was slowing.
Although a cooling economy is what the Federal Reserve wants to see, economist believe this jobs report does not guarantee an interest rate cut.
“This not-too-cold/not-too-hot Goldilocks economy is what we want to see as the Federal Reserve will deliberate on the timing of interest rate cuts in the second half of 2024. In addition to today’s report, the Fed is watching a range of other economic indicators, most notably inflation,” Lisa Sturtevant, the chief economist at Bright MLS, said in a statement. “The first June inflation reading will be out next week. Lower inflation and a looser labor market means it is more likely for there to be two rate cuts instead of one in 2024.”
If the Fed does cut interest rates, Sturtevant believes housing market activity will pick up as many buyers have been waiting on the sidelines hoping for lower rates.