Hiring slows in June: Will that help the Fed cut interest rates?

The Bureau of Labor Statistics (BLS) released its monthly US employment report, in which It is noted that hiring was reduced in JuneAlthough the labor market remains strong, this slowdown could help the Federal Reserve (Fed) decide to start lowering its benchmark interest rates.

According to the report from the Department of Labor (DOL) office, nonfarm payrolls increased by 206,000 jobs last month and Unemployment rose to 4.1% from 3.4% at the beginning of 2023, its lowest level in decades.

June is the second month of decline. In May, 218,000 more jobs were added instead of the previously reported increase of 272,000. And April was also revised downwards, from 165,000 to 108,000.

As for workers’ earnings, there was a 3.9% increase in average hourly pay in June compared to the previous year. This rate of increase is the smallest since 2021.

According to the analysis of labor specialists, the slight slowdown in hiring and the slight salary growth could increase confidence among Fed officials to initiate interest rate cuts at its next meeting. While inflation is still above the 2% target, it has remained on the low side. By cutting benchmark rates, it would also lower borrowing costs for consumers and businesses.

“Federal Reserve officials have increasingly focused on downside risks to the labor market, and June data reinforces our forecast that the Fed will cut rates in September and in all subsequent meetings,” said Nancy Vanden Houten, chief U.S. economist at Oxford Economics.

June inflation data to be released next weekwill be decisive in determining whether this change in monetary policy is reinforced or the Fed remains unchanged.

The Federal Reserve has kept its overnight interest rate, which indicates what banks charge each other for short-term loans, in a range between 5.25% and 5.50% from July 2023.

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