Economy added 206,000 jobs in June: The key facts and figures

The interpretation

“The numbers still show resiliency in the labor market,” Brian Marks, executive director of the University of New Haven’s Entrepreneurship and Innovation Program, told the Washington Examiner. “Although the unemployment rate ticked up 4.1% we still see a growth in employment of 206,000.”

“We’re seeing a stable yet weakening or a cooling economy,” he added, noting that the Fed will likely hold interest rates steady at its next meeting.

What it means for…Biden

The report is welcome news for President Joe Biden, who is suffering from high disapproval ratings related to his handling of the economy. Biden is running low on time to turn around voter perceptions of his handling of the economy before the election.

Friday’s report shows the economy is still adding jobs, and in a welcome development, the employment numbers came in better than expected.

“With today’s report that 206,000 jobs were created last month, a record 15.7 million jobs have been created during my Administration,” Biden said in a statement released after the report. “We have more work to do, but wages are growing faster than prices and more Americans are joining the workforce, with the highest share of working-age Americans in the workforce in over 20 years. That’s real progress for hardworking families who have the dignity and respect that comes with earning a paycheck and putting food on the table.”

What it means for…the Fed

The Federal Reserve is likely to interpret the continued job growth in June as an indication that its efforts to tame inflation via interest rate hikes are not yet taking a huge toll on the health of the economy.

Accordingly, Friday’s report will add to its willingness to be patient before lowering its interest rate target.

Still, the report does show some cooling in the labor market. If subsequent reports continue to show employment growth slowing, or reversing course, it could push up the timing of a rate cut.

The underlying reality

It is important not to read too much into any one jobs report. The payroll numbers bounce around from month to month and are revised in subsequent reports.

Instead, it is helpful to look at the trend. The three-month moving average of job gains slowed to 177,000.

Roughly 110,000 new payroll jobs are needed each month to keep unemployment from rising, according to the Federal Reserve Bank of Atlanta. Note, though, that a separate estimate that takes into account the full extent of recent immigration puts the number as high as 200,000.

Prime-age employment, relative to the overall population, is strong by historical standards.

Recession watch

The unemployment rate, taken from the jobs report’s household survey, is low. Although it has ticked up in recent months.

Recessions entail a rising unemployment rate.

Friday’s data suggest the U.S. is close to but still short of triggering one major recession indicator — namely, when the three-month moving average of the unemployment rate rises half a percentage point relative to its minimum point over the past year. This indicator, known as the Sahm Rule, signaled the start of all postwar recessions.

Industries to watch

The leisure and hospitality sector is just above the levels of employment it reached in February 2020, right before restaurants and bars were forced to shut down across the country.

Construction employment has remained robust, even as the housing market has taken a massive hit over the past few years as mortgage rates have soared alongside the Fed’s rate hikes. That’s in part because of a huge backlog of construction of multifamily housing over recent months. Economists will watch closely for any sign of slowing hiring in construction.

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Unemployment rates by race/ethnicity

The household survey also includes unemployment rates by race and ethnicity. Rates for all groups neared record lows in the past few years but appear to have drifted up recently.