The Labor Market Posts Record Hires Despite Tight Conditions.
After the recent release of the minutes from the previous Federal Reserve meeting, some hawkish notions may be confirmed by robust labor market data. For the month of June, the Fed’s worries came true, and private industry jobs surged at a record pace to 497,000. This was far ahead of May’s addition of 267,000 jobs and over twice as larger than the forecasted 220,000. This figure was also the biggest monthly rise since July 2022, when interest rates were three and a half percentage points lower. When broken down into sectors, leisure and hospitality held most new hires with 232,000, mostly due to the pent-up travel demand from the pandemic. During the same period, annual pay rose 6.4%, far slower than normal depicting some persistence of inflationary harm. Not all data showed such a hot job market, such as May’s JOLTS report; falling below estimates, job openings in the month of May fell by 496,000, a sign that higher rates are having a modest effect on the industry.
Since the tightening of fiscal policy last year, the Federal Reserve has had a difficult battle with suppressing the normally interest-rate sensitive labor market. Despite rates that are at their highest levels in 17 years, companies have remained exceptionally staff hungry. The primary reason for the lack of deterrence from higher rates is due to the pandemic, where corporations realized the true value of a strong workforce. Regardless, more data in the form of nonfarm payrolls and June’s unemployment rate will release Friday, potentially adding more to the Fed’s long-listed plate this summer.
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I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.