Unemployment reached a nearly 2 1/2 year high of 4.1 percent in June, according to the U.S. Bureau of Labor Statistics.
Total nonfarm payroll employment increased by 206,000 last month as job gains were reported in government, social assistance, health care and construction. The number of unemployed people remained consistent at 6.8 million, which was higher than June 2023 when unemployment was historically low at 3.6 percent and 6.0 million people were unemployed.
Unemployment had been below 4 percent for 27 straight months before rising to 4 percent in May. “The 4 percent number is not a specific concern at the moment,” said Rob Haworth, senior investment strategy director at U.S. Bank Wealth Management. “It will only become an issue if we see a surprising upturn from here.”
Employment in the government sector increased by 70,000 in June, higher than the average gain of 49,000 over the previous 12 months. The construction industry added 27,000 jobs last month, exceeding the average monthly gain of 20,000 over the previous 12 months.
Driven by a rise in employment in ambulatory health care services and hospitals, the health care sector added nearly 50,000 jobs in June, which was lower than the average monthly increase of 64,000 over the previous 12 months.
Retail employment lost 9,000 jobs in June. Furniture, home furnishings, electronics and appliance retailers shed more than 6,000 positions while warehouse clubs, supercenters and other general merchandise retailers added 5,000 jobs. The professional, scientific and technical services industries added 24,000 jobs.
The average workweek for employees on private nonfarm payrolls was 34.3 hours for the third straight month. The average manufacturing workweek remained at 40.2 hours.
There was little other change in employment in other major industries, including mining, quarrying and oil and gas extraction; manufacturing; wholesale trade; transportation and warehousing; information; financial activities; leisure and hospitality; and other services, according to the report.
The number of long-term unemployed increased by 166,000 to 1.5 million in June, up from 1.1 million a year ago.
The unemployment rate for adult women increased to 3.7 percent and 4.1 percent for Asians. Jobless rates for adult men, teenagers, whites, Blacks and Hispanics were little changed. The labor force participation rate also remained little changed at 62.6 percent, and the employment-population ratio was 60.1 percent.
The number of part-time workers who preferred full-time work but had their hours reduced or were unable to find full-time positions was little changed in June at 4.2 million. There were 5.2 million people who were out of the labor force who currently want a job, down 483,000 from May.
The unemployment report was released as the Federal Reserve kept its target federal funds rate at between 5.25 and 5.50 percent. In recent speeches, Govs. Michelle Bowman and Lisa Cook have been noncommittal on when the Federal Open Market Committee will start reducing interest rates. Though the FOMC initially signaled several interest rate cuts are likely this year, the committee has since dropped that number to one.
Haworth expects the Federal Reserve will monitor average monthly wage growth, which fell to 3.9 percent for the 12 months ending in June following a 4.1 percent jump in May.
“The Fed is likely awaiting a sustained, downward trend in wage growth as a positive sign that inflation is easing,” Haworth added.
U.S. Bank Senior Economist Matt Schoeppner said the continued strength of the job market could complicate the Fed’s plans to cut interest rates. “A tight labor market offering more competitive wages has played an important role providing consumers the wherewithal to maintain higher spending levels. That has likely contributed to inflation’s persistence,” according to the report.
