The behavior of the US labor market in June has defeated the gloomy expectations of analysts. Employment growth was higher than expected and the unemployment rate, at 3.6% -the same as in May-, remained close to the lows registered before the pandemic, signs of persistent strength in the labor market that give the Federal Reserve (Fed) margin for a new rise in interest rates by 75 basis points this month, although some experts already value a rise of 50 basis points after knowing the monthly report. The good employment data clears the immediate horizon of the threat of a recession, but also complicates the task of the Fed when it comes to fighting inflation, at all-time highs and a record 8.6% in June.

Non-farm payrolls increased by 372,000 last month, the Labor Department reported this Friday, which has also published updated data for May, with a downward correction of 384,000 jobs instead of the 390,000 announced. initially. In April, 368,000 were added. Jobless claims increased only slightly from their lowest point in March, nailing the unemployment rate at an enviable 3.6% (any figure below 5% is considered good, close to practical full employment). The salary increase was 5.1% in June, compared to 5.3% in May, in interannual rate.

As the dollar rose, ever closer to parity with the euro, the S&P 500 and Nasdaq indices fell after the data release. Treasury yields soared, but 2-year and 10-year yields remained inverted for a fourth day. The Bloomberg commodity index was approaching its worst weekly reading since March 2020.

Economists forecast a slowdown in job creation in June, to 270,000 jobs, according to forecasts in the newspaper The New York Times. Those consulted by the Reuters agency pointed to 268,000 contracts, and 265,000 according to Bloomberg experts. Even taking the slowdown for granted, economists stress that it is not a concern, given that the unemployment rate remains at historically low levels and June was another month of wage growth, suggesting that companies are still eager to find skilled workers and retain the ones they already have. In any case, the good employment data presents an ambivalent reading: they allay the concerns of a slowdown, but complicate the efforts to combat inflation.

Job creation underscores the stark contrast between labor market resilience and fears of a recession. The shortage of workers and the inability of employers to fill millions of vacant positions fuel sustained wage pressure. Although several large companies announced in June their intention to cut staff, layoffs so far have been concentrated in technology-sensitive sectors – especially in startups- and the increase in interest rates, such as housing.

However, consumer spending is already showing signs of some slowdown in the face of rampant inflation and rising interest rates. Other factors also point to an incipient cooling of the economy. Demand for residential real estate has slowed and new home construction is grinding to a halt; the commodity market is on a string of declines, signaling a slowdown in global demand, and Wall Street has suffered its worst first half in more than 50 years.

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