The U.S. economy added fewer than expected new jobs last month, adding a further layer of complexity into the market's attempt to assess the strength of the labor market.
The Labor Department's Bureau of Labor Statistics reported on Friday that 209,000 new jobs were created last month, well shy of the Wall Street consensus forecast of a 228,000 gain and the weakest monthly gain since December of 2020.
Private payrolls were pegged at 149,000, the BLS said, as the unemployment rate eased to 3.6%, just ahead of the 1969 low of 3.4% recorded earlier this year.
The BLS also revised its May jobs-addition estimate lower, to 306,000 from its original estimate of a 339,000 net gain, while cutting its April estimate to 217,000 from its prior estimate of 294,000.
The BLS noted that hourly wages were up 0.4% on the month -- compared with the 0.3% gain recorded in May and the 0.5% pace of March and April. Wall Street's consensus forecast was for a 0.3% gain.
On a year-on-year basis, wages were up 4.4%, compared with the 4.3% pace recorded in May, the BLS said, and the Wall Street forecast of 4.2%.
“Employment in the U.S. has been stronger than many had expected, which has resulted in consumers being better able to withstand the pressures of high inflation and the Fed’s aggressive hiking cycle," said Richard Carter, head of fixed interest research at Quilter Cheviot.
"Next week’s inflation figures will paint a clearer picture of the Fed’s next steps, but today’s figures suggest that not only will it hike rates later this month, but it may have to go even further than it would have hoped in the coming months if the labour market does not begin to show signs of weakening.”
Fed Largely Expected to Boost Rates in July
U.S. stocks were mixed following the data release, with the Dow Jones Industrial Average down 25 points in the opening hour of trading and the S&P 500 rising 3 points. The tech-focused Nasdaq was marked 42 points higher.
Benchmark 10-year Treasury note yields rose 2 basis points from overnight levels to 4.058% while 2-year notes edged higher to 4.978%.
The U.S. dollar index, which tracks the greenback against a basket of its global peers, was marked 0.35% lower at 102.802.
CME Group's FedWatch now indicates a 92.4% chance of a 25-basis-point (0.25 percentage point) hike later this month, up from 81.6% at the close of trading on June 30, with bets on another rate hike in November hovering at around 40%.
Earlier this week, payroll-processing group ADP said in its National Employment Report that private sector jobs grew by 497,000 last month, well ahead of Wall Street forecasts of a 228,000 gain, using the new methodology developed last summer.
Wages gains for those staying at the same jobs slowed to 6.4%, ADP said, while gains for job-changers fell to 11.2%, the slowest since October 2021.
In a separate report Thursday, the Labor Department said weekly jobless claims rose modestly to 248,000, just ahead of analysts' estimates of a 245,000 tally.
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