Executive summary
U.S. payrolls added 206,000 jobs in June, beating the consensus expectations of 190,000. However, sharp downward revisions lowered the prior two months by 111,000, taking the six-month average job gain to 222,300 (from 254,800 previously).
There were more signs of cooling, albeit modest. For instance, the unemployment rate ticked up to 4.1%, though it was due to more workers coming back into the workforce, especially prime-age workers, which hit a 22-year high. Moreover, 4.1% is still well below what is considered full employment.
As we have noted, the U.S. economy is cooling but not weak. Moreover, we don’t think the economy “needs” cuts to avoid a recession in the near term. That supports the Federal Reserve (Fed) holding rates steady for a little longer. Yet, cooling conditions within the labor market are becoming more apparent, including signals from weekly jobless claims, along with cooler inflation readings. Thus, the path is widening for a sooner Fed rate cut, perhaps in September, if overall cooling trends continue.
