U.S. Economy Adds 372,000 Jobs in June, Exceeding Expectations

U.S. employers added 372,000 jobs in June, according to the Bureau of Labor Statistics (BLS). Payroll growth came in below May’s revised increase of 384,000 positions, but far exceeded consensus estimates of a 250,000 gain.

The readings confirm a healthy labor market that has defied expectations amid a worsening economic outlook and rising interest rates. Strong job growth and a tight labor market would support the Federal Reserve’s position to hike interest rates further at the Fed’s upcoming July policy meeting.

Professional and Business Services Sector Leads Job Gains

Broken down by sector, job growth was strongest within the professional and business services sector, which experienced a gain of 74,000 positions. Jobs in the leisure and hospitality, and healthcare sectors also expanded, by 67,000 and 57,000 positions, respectively. Meanwhile, manufacturing employment recovered to its pre-pandemic level reached in February of 2020, adding 29,000 positions in June.

Total Payrolls Approaching Pre-Pandemic Peak

Total nonfarm payrolls, which encompass both public and private-sector employment, rose to 151.98 million. With last month’s gains, nonfarm payrolls are currently 524,000 positions or 0.3% short of their pre-pandemic peak in February 2020, when they numbered 152.5 million. 

Private sector employment has recovered its pandemic-era losses and currently exceeds its February 2020 baseline by 140,000 positions. However, public sector, or government employment has yet to recover, lagging its pre-pandemic level by 664,000 positions.

Unemployment, Labor Force Participation Rates Little Changed

The unemployment rate held steady at 3.6% for the fourth consecutive month, with the total number of unemployed persons roughly unchanged at 5.9 million in June, compared to 5.7 million just before the pandemic hit.

Meanwhile, the labor force participation rate was little changed at 62.3%, while the employment-to-population ratio numbered 59.9%. Both figures remain well below their pre-pandemic levels of 63.4% and 61.2%, respectively, as a sizeable share of individuals who dropped out of the labor market during the pandemic have yet to return. This includes 2.1 million individuals who reported they were unable to work as their employer closed, or lost business, due to the pandemic.

Earnings Growth Continues to Lag Inflation

Average hourly earnings for private-sector employees rose by $0.10, or 0.3%, to $32.08. Year-over-year, nominal earnings rose 5.1%, considerably below the annual inflation rate of 8.6% reflected in May’s Consumer Price Index. Wage gains have been unable to keep pace with inflation in recent months, causing the real earnings and purchasing power of consumers to decline. Meanwhile, the length of the average workweek for production and nonsupervisory workers was little changed at 34 hours, while the figure for manufacturing employees also held steady at 40.3 hours.