US employers still reluctant to add many jobs as hiring slows in June

WASHINGTON (AP) — U.S. employers slowed hiring last month and added only 57,000 jobs, less than half the previous month’s total and a sign companies still have a cautious economic outlook.

The Labor Department said Thursday that the unemployment rate declined to a low 4.2% from 4.3% in May, though the drop mostly occurred because many people out of work gave up looking and were no longer counted as unemployed.

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The figures suggest businesses remain wary of the economy’s health, with inflation at a three-year high and consumer confidence near post-pandemic lows. The job market has been stuck in a “low-hire, low-fire” rut in which the employed enjoy some job security with layoffs low, but those out of work are struggling to get hired. Strong hiring in the spring raised hopes the economy was escaping that dynamic, but Thursday’s report suggests job gains are still muted.

“We are in a market that is still very fragile, and still susceptible to shocks happening,” Nicole Bachaud, labor economist at ZipRecruiter, an online job platform, said. “There is still a lot of hesitation on the part of employers and workers themselves to make any moves.” She noted that other government data shows companies are posting more jobs but not filling them.

Hiring has improved from last year, when employers added fewer than 10,000 jobs a month, on average. In this year’s first half the pace improved to 92,000. Yet healthy job gains that were initially reported in April and May were revised lower, from 172,000 down to 129,000 in May and from 179,000 to 148,000 in April.

Restaurants and bars cut jobs last month, despite the World Cup

Restaurants, bars, and hotels cut 61,000 jobs, a sharp disappointment for those who expected the World Cup tournament that is taking place in multiple U.S. cities would lead to at least temporary job gains. Retailers also shed 7,500 jobs.

Chad Moutray, chief economist at the National Restaurant Association, said member companies are seeing signs consumers are pulling back on eating out, particularly outside higher-income households. It reflects a “K-shaped” economy, where wealthier households pull ahead of middle- and lower-income ones.

“We continue to hear that a lot of Americans are struggling to make ends meet,” he said. “If you’re catering to the upper-end of the K, you’re doing fine. If you’re catering to the lower part of the K, you’re seeing some challenges in the last couple of months.”

Many Americans worry about the impact of artificial intelligence on employment, but for now AI may actually be adding jobs. Last month professional and business services, a category that includes architecture, engineering, and software development — occupations expected to be vulnerable to AI — added 36,000 jobs. Healthcare, the economy’s most consistent job creator, added nearly 47,000 positions.

Construction firms added workers, possibly because of AI buildout

Blue-collar industries added a modest number of jobs, with manufacturers adding 3,000 positions and construction firms 11,000.

Scottsville, New York-based Power & Construction Group added some of those jobs as it seeks to keep up with the demand for greater electrical capacity in the state. Thomas “Murph” Murphy, the company’s vice president, said they are looking to hire another 15-20 workers after adding 47 in the past two months.

The company is seeking more electricians, laborers, and heavy equipment operators to join the 350 workers on staff, Murphy said.

Murphy said his company is competing for workers with firms building data centers in other states — not many are being built in New York — and he has to work to convince young people to choose construction as a career. The firm recently built a training center to bring newer, younger workers up to speed.

“The grid can’t handle all the new power that everybody’s using,” Murphy said, noting the increase in laptops, phones, and tablets in many Americans’ homes. “We need to continuously build the grid. But it does take time.”

Jobs data could keep Federal Reserve on sidelines

Thursday’s report suggests that hiring and wage gains aren’t accelerating enough to worsen inflationary pressures in the economy, which could allow the Federal Reserve to keep its key rate unchanged at its current level of about 3.6%.

Previously, many Wall Street investors had expected the central bank to lift its key rate this year as hiring appeared to be accelerating. The prospect of no rate cuts lifted the stock market in mid-morning trading, with the broad S&P 500 index up 0.7%.

“Today’s data hit the sweet spot for markets — strong enough to keep worries about growth at bay, but soft enough to reduce the probability of a rate hike,” said Eric Winograd, chief U.S. economist at AB Global, an asset management firm.

Fed chair Kevin Warsh in Portugal Wednesday reiterated that he would push inflation back to the Fed’s 2% target, though he wouldn’t comment on whether the Fed would raise rates at its next meeting, later this month.

Average paychecks, meanwhile, rose 3.5% from a year ago, a decent gain but one that still trailed inflation, leaving many Americans struggling to keep up with rising costs for necessities such as food, gas, and housing.

Historically, a job gain of just 57,000 would be seen as weak. Yet as more Americans retire and new immigration has dropped sharply, the U.S. workforce has shrunk in the past year. As a result, even gains at that level are enough to keep the unemployment rate unchanged over time.

Fewer Americans are working or seeking work

Last month, in fact, the workforce declined sharply, with the percentage of Americans working or looking for jobs falling to 61.5%, down from 61.8% in May. It’s the lowest level in five years.

Much of the decline reflected the aging of the population, as more than 10,000 Americans turn 65 every day and many retire. Yet the proportion of Americans aged 25 through 54 who are working or searching for jobs also fell last month.

Mismatches between job-seekers and employers could be slowing hiring as well. Bachaud said AI adoption could have encouraged a trend she’s noticed on their website: Companies are increasingly posting jobs seeking more senior, experienced workers, while job hunters are instead gravitating toward entry-level jobs.

That gap “just shows the mismatch between what employers are looking for and what current job seekers have to offer,” she said. It has likely contributed to the frustration many job seekers feel even as the unemployment rate remains low.