The economy added a solid 209,000 jobs in June, just below economists’ expectations of 225,000.
June’s number signals a labor market that remains strong while cooling from the hottest labor market on record in 2022.
The 209,000 jobs added by employers in June signal that businesses remain confident in adding new positions in addition to backfilling open roles. June’s job gains bring the 2023 total to 1.7 million through the first half of the year, exceeding the annual total projected by many economists.
Job gains have certainly begun to normalize, and June’s total is right in line with the pre-pandemic average of 200,000 jobs added per month. December 2020 remains the last time monthly job gains were below 200,000.
Job gains for both April and May were revised downward by a total of 110,000, suggesting the labor market was a bit cooler the past two months than the initial numbers indicated.
Demand for Workers Starting to Slow
Despite job gains returning to a pre-pandemic level, the labor market is among the tightest in history, and the shortage of talent continues to prove challenging for many businesses.
Job openings are a key indicator of labor demand. And May’s job openings, reported earlier this week, showed signs that companies have continued to let up in terms of hiring plans.
Job openings increased decreased by nearly 500,000 to 9.8 million. While job gains have declined from last year’s average of just over 11 million per month, they remain much higher than the 2015 to 2019 average of 6.4 million monthly job openings.
As demand for workers starts to moderate, we’d expect record wage growth to ease, but June’s jobs report shows 12-month wage growth ticked up slightly to 4.4%. Wage growth has been hovering around 4.4% all year long, and doesn’t seem to be slowing.
Layoffs Hold Steady as Unemployment Ticks Down Slightly
Hiring is still quite robust, and layoffs have not increased at the pace many projected. Layoffs held steady in May at 1.6 million, below the 1.9 million monthly average layoffs before the pandemic.
And the unemployment rate ticked down to 3.6%, just above pre-pandemic lows. With 9.8 million job openings, and just under 6 million unemployed workers available to fill those open roles, there are 1.6 open jobs for each unemployed worker.
Throughout the first half of the year, the labor market started to moderate but remained stronger than many expected. The strength of labor market metrics has been in sharp contrast to the more pessimistic sentiment, especially with tech-heavy layoffs and rising interest rates in the headlines.
Our prediction for the second half of 2023 is that the labor market will continue moderating to historic norms. But with a labor force that’s not growing as fast as demand and an unemployment rate near historic lows, the labor market will remain incredibly tight and competition for talent is unlikely to let up.
Companies will need to watch the labor market and track compensation trends closely this year to stay competitive.