In June, the United States created 209,000 new jobs, which is the smallest increase in over two and a half years. This could potentially indicate a cooling labor market as rising interest rates gradually weaken the economy. According to a survey by the Wall Street Journal, economists had initially forecasted a 240,000 increase in new jobs. The government reported that the unemployment rate decreased from 3.7% to 3.6% on Friday.
This softer employment report may alleviate concerns for senior officials at the Federal Reserve, as they aim to slow down hiring and economic growth in order to combat high inflation. However, it may not be enough to prevent a further increase in interest rates. The Federal Reserve is expected to raise rates later this month in an effort to restore inflation to pre-pandemic levels of 2% or less. Currently, inflation has been stuck in the 4% to 5% range.
While higher borrowing costs can reduce inflation by slowing down the economy, they also pose the risk of a recession.
Despite expectations, the economy continues to expand at a brisk pace.
However, the Federal Reserve is prepared to keep raising rates until the economy slows down even further and they are confident that high inflation will dissipate.
Before the release of the jobs report, the Dow Jones Industrial Average (DJIA) and S&P 500 (SPX) were expected to open slightly lower. The yield on the 10-year Treasury (BX:TMUBMUSD10Y) inched up to 4.1%.