US jobs growth slows in June but exceeds expectations

According to official figures, US job growth stalled last month, although the economy still formed more posts than anticipated.

Job Growth and Unemployment Rate

US jobs growth slowed in June, though the economy still created more positions than expected, according to official figures. Employers added 206,000 jobs, surpassing economists’ forecast of 190,000.

However, the number of jobs created in May was revised down to 218,000 from the initial estimate of 272,000. The unemployment rate edged up to 4.1%, and wage growth rose at its slowest pace in three years.

Implications for the Federal Reserve

The figures suggest that the US central bank, the Federal Reserve, might be closer to cutting interest rates later this year.

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Emily Bowerstock Hill, CEO of Bowerstock Capital Partners, described the data as “relatively benign,” noting that it isn’t alarming enough to cause market concern or worry the Fed.

She highlighted that the Fed has signaled a potential rate cut this year. US interest rates were held steady at 5.25%-5.5% in June, where they have remained since July last year.

Market Reactions and Future Rate Cuts

Financial markets are betting on a roughly 72% probability of a rate cut at the Fed’s September meeting, with increasing chances of a second rate cut in December.

In June, officials adjusted their outlook, predicting a single quarter-point cut this year instead of the previously expected three-quarters of a percentage point reduction. The Fed’s decision was influenced by the stickier-than-expected rate of price increases and strong job market figures.

Global Central Bank Trends

Central banks worldwide tend to follow the Fed’s lead in adjusting rates. However, Bank of England governor Andrew Bailey remarked in May that the Fed doesn’t necessarily have to be the first to act.

Conclusion

While US jobs growth has slowed, the economy continues to add more jobs than anticipated. The latest figures suggest a potential rate cut by the Federal Reserve later this year, with financial markets already pricing in this possibility.

The Fed’s decision-making will continue to be closely monitored as economic conditions evolve.