Reuters: U.S. June Employment Growth Exceeds Expectations, Unemployment Rate Drops to 4.1%
Reuters Washington, July 3rd - Strong U.S. job growth in June and an unexpected drop in the unemployment rate to 4.1% indicate a stable labor market, which may allow the Federal Reserve to delay its rate cut cycle until September.
The U.S. Bureau of Labor Statistics (BLS) said in its closely watched employment report that nonfarm payrolls increased by 147,000 jobs last month, following an upward revision of 144,000 jobs in May.
Economists surveyed by Reuters had predicted that after the previously reported 139,000 jobs added in May, employment would increase by 110,000. Estimates ranged from 50,000 to 160,000 new jobs.
As Friday is a holiday for Independence Day, the report was released a day early. Although the number of jobs added exceeded expectations, job growth is slowing, mainly reflecting lackluster hiring. The layoff rate remains quite low, as employers have tended to retain workers after the difficulty of finding labor during and after the COVID-19 pandemic.
Economists say that President Donald Trump's focus on what they call anti-growth policies, including comprehensive tariffs on imported goods, large-scale deportation of immigrants, and significant cuts in government spending, has changed public perceptions of the economy. After Trump's victory in the presidential election last November, business and consumer confidence surged, with expectations of tax cuts and a less stringent regulatory environment, but this soon declined, with the unemployment rate dropping from 4.2% in May. Economists had previously expected the unemployment rate to rise to 4.3%.
Indicators such as the number of people applying for state unemployment benefits and receiving unemployment checks suggest that the labor market is showing signs of fatigue after strong performance protected the economy from a recession. Most economists expect the unemployment rate to rise during the second half of this year and may encourage the Federal Reserve to resume its monetary easing cycle in September.
The Federal Reserve kept its benchmark overnight interest rate in the range of 4.25%-4.50% last month, the same level since December. Federal Reserve Chair Jerome Powell reiterated on Tuesday that the central bank plans to "wait and learn more" about the impact of tariffs on inflation before cutting rates again.
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