Newswise — June’s U.S. jobs report showed employers added just 57,000 jobs, raising questions about hiring momentum and the Federal Reserve’s next steps. Michael Faulkender, the William A. Longbrake Professor of Finance at the University of Maryland’s Robert H. Smith School of Business and former Deputy Secretary of the Treasury, says the slowdown is not evidence of weakening employer demand — and he points reporters to the latest JOLTS (Job Openings and Labor Turnover Survey) data to understand why.
Faulkender notes:
“For an understanding of employer demand for jobs, we can look at the JOLTS report for the end of May that came out on Tuesday. It showed that job openings totaled 7.59 million, nearly identical to the end of April and up from 7.31 million a year ago. The low jobs number from June is not the result of low demand for workers. Instead, it is that we have a worker shortage. With demographic changes (an aging society having fewer children and reductions in immigration), there are not enough skilled workers to fill the jobs that are out there. This is also highlighted by the fact that the unemployment rate fell in June from 4.3% to 4.2%.”
He adds that hiring activity remains historically strong:
“In May, according to JOLTS, there were 5.10 million separations and 5.17 million hired. While the net amount in June was 57K net new jobs, there were still roughly 5 million job moves in May alone. Total separations are in line with where they have been since this data started being gathered in 2000, outside of recessions. Total hires are coming down compared to the end of the pandemic, but they are still stronger than where they were from 2009 to 2015. I would not call this a low-hire jobs market.”
On monetary policy, Faulkender emphasizes that the June report does not alter his view of the Fed’s rate path — and clarifies how to interpret his inflation outlook:
“This report does not change my view on interest rates. With seeming resolution to the conflict in Iran and gas prices coming down significantly, I would expect monthly inflation reads for June and July to be negative. The twelve-month rate should come down significantly. Once the reduction in gas prices is realized and inflation is near the Fed’s target with job growth commensurate with population growth, I do not see a need for changes in interest rates.”
