US job gains smallest in 2-1/2 years; labor market still tight

investing.com:

By Lucia Mutikani

WASHINGTON (Reuters) — The U.S. economy added the fewest jobs in 2-1/2 years in June, but persistently strong wage growth pointed to still-tight labor market conditions that most certainly ensure the Federal Reserve will resume raising interest rates later this month.

The Labor Department's closely watched employment report on Friday also showed 110,000 fewer jobs were created in April and May, indicating that higher borrowing costs were starting to dampen businesses' appetite to continue boosting headcount. There was also a jump in the number of people working part-time for economic reasons last month, in part because their hours had been reduced due to slack work or business conditions.

Nevertheless, the pace of jobs growth remains strong by historical norms and added to data this week showing an acceleration in services sector activity in suggesting that the economy was nowhere near a long-forecasted recession.

«The payroll numbers gave a whiff of weakening, but the labor market remains strong,» said Sean Snaith, the director of the University of Central Florida's Institute for Economic Forecasting. «By no means is the Fed's work done. We're in a protracted battle against inflation, and nothing in today's report suggests otherwise.»

Nonfarm payrolls increased by 209,000 jobs last month, the smallest gain since December 2020, the survey of establishments showed. Economists polled by Reuters had forecast payrolls rising 225,000. It was the first time in 15 months that payrolls missed expectations.

Job growth averaged 278,000 per month in the first half of the year. The economy needs to create 70,000-100,000 jobs per month to keep up with growth in the working-age population.

Employment growth is in