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박재훈투영인 프로필 사진박재훈투영인
US jobs report shows a steady slowdown in the labor market (Jul 5, 2024)
created At: 1/31/2025
Neutral
Neutral
This analysis was written from a neutral perspective. We advise you to always make careful and well-informed investment decisions.
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Fact
U.S. job growth in June: 206,000 jobs added Unemployment rate rose to 4.1%, the highest since November 2021 Unemployment rate increased for two consecutive months Federal Reserve’s benchmark interest rate remains at its highest level since 2001 Inflation remains above the 2% target Markets showed a muted reaction to the employment data
Opinion
The current labor market situation is sending highly concerning signals. The consecutive rise in the unemployment rate suggests that the Fed’s aggressive tightening policy is placing excessive strain on the economy. Delayed rate cuts could further increase the risk of a recession. Given the Fed’s historical miscalculations in timing rate adjustments, the current situation appears even more precarious.
Core Sell Point
The Fed’s prolonged tightening policy and potential misjudgment in the timing of rate cuts could worsen the recession risk, leading to a sharp deterioration in the labor market.

  • The US economy added 206,000 jobs in June and the unemployment rate rose to 4.1%, according to the Bureau of Labor Statistics.

  • Wall Street was hoping for a “Goldilocks” number for June, which would show a slow and steady decline in monthly job gains that equates with a slowing economy.

  • Markets showed little reaction to the jobs data, though the S&P later hit an intraday high.

  • A dramatic increase in jobs could have pushed the Federal Reserve to hold off on cutting rates, keeping lending costs high for businesses and households.

  • On the other hand, a dramatic decrease could have indicated a concerning weakness in the labor market.

  • Friday’s number shows that the labor market remains strong, but is gradually ebbing.

    For the past few years, Federal Reserve officials said they wanted the labor market to get into better balance after the pandemic ushered in a red-hot labor market, which at its height had a whopping 12 million job openings coupled with an ultra-low unemployment rate. That caused employers to raise wages to attract workers, but in turn, helped usher in high inflation, prompting the central bank to raise rates.

    Now, Fed officials are starting to get a taste of what they wished for. It might not end well, though.

    Friday’s jobs report showed the unemployment rate rose to 4.1% in June, the highest level since November 2021. It also marked the second straight month that the unemployment rate rose.

    Fed officials are currently wrestling with when to cut interest rates, which are at the highest level since 2001. They’ve intentionally kept rates high for a long time to slow economic growth in order to rein in inflation, which remains above its 2% target.

    The problem, though, is that the Fed is notoriously bad at timing its rate cuts correctly. It’s no simple task, since there are so many unknowns about the economic outlook.

    Still, if the unemployment rate continues to rise, that could mean the Fed left interest rates at an overly restrictive level for too long, and should have cut rates sooner to minimize the economic fallout.

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