The latest data reveals a slowdown in US jobs growth, indicating that the world's largest economy may be feeling the impact of higher interest rates. According to the Labor Department,

employers added only 209,000 jobs in June, marking the smallest increase in over two years.

While the unemployment rate dipped to 3.6% from May's 3.7%, the lackluster job gains fell below expectations. The performance of the labor market is being closely monitored as the US central bank implements higher borrowing costs to combat inflation.

Despite the Federal Reserve's benchmark interest rate surpassing 5% within a year, hiring has remained robust. However, June's figures, although still sufficient to accommodate labor force growth, reflect the lowest number of jobs added since December 2020.

Average wages continued their upward trajectory, rising by 4.4% compared to the previous year. Nevertheless, the monthly report, combined with a decline in job vacancies, suggests a potential cooling of the labor market.

Commenting on the situation, Richard Flynn, Managing Director at Charles Schwab UK, stated, "Today's jobs report is slightly weaker than many expected. The labor market remains tight, but investors will likely interpret these numbers as a sign that cracks are beginning to emerge."

Economists have been anticipating a slowdown due to higher interest rates, leading consumers to reduce spending in various sectors and making borrowing for business expansion more expensive.

In terms of sector-specific performance, government and healthcare companies fueled the hiring in June. However, retailers and transportation firms experienced job cuts, while the leisure and hospitality sector added a mere 21,000 positions.

Despite the weaker job growth, analysts still anticipate another interest rate hike at the upcoming central bank meeting later this month. Photo by Phil Whitehouse, Wikimedia commons.