the jobs market remained solid heading into midyear as hiring continued at a healthy clip in june as a result the federal reserve is believed to be on track to announce another interest rate increase this month while the government’s report revised down estimates for new job creation in april and may the pace of hiring through 2023 has been remarkably stable with the unemployment rate at historically low levels and upward pressure on wages continuing to reflect a tight job market against this backdrop it is expected that when the fed meets on july 2526 it will raise its federalfunds rate target by another quarter of a percent the regulator previously paused rate hikes at its june meeting the june jobs report from the bureau of labor statistics showed that total nonfarm payrolls rose by 209000 roughly in line with economists’ expectations “job growth does appear to be inching downwards but it’s still higher than the fed is targeting” says morningstar chief us economist preston caldwell “today’s report provides no reason to dissuade the fed from hiking the federal funds rate”   total nonfarm payrolls rose by 209000 versus a revised 306000 in may   the unemployment rate edged down to 36 from 37 in may   average hourly wages grew by 04 to 3358 after rising 04 in may “june brought a solid increase in nonfarm payroll employment of 209000 jobs albeit with downward revisions to gains in april and may by a combined 110000 jobs compared to data reported last month” caldwell says all together nonfarm payroll employment has increased by 19 annualized in the past three months by his measure that’s slightly lower than the 22 growth rate reported last month caldwell says “and it’s also slightly lower than the 24 rate seen in the first three months of 2023” caldwell says it’s possible that job growth will eventually be further revised down slightly he explains “according to the philadelphia fed data from the quarterly census of employment and wages suggests an eventual downward revision to nonfarm payroll levels of around 05 if that proves correct it will be incorporated into revised nonfarm payroll figures released in february 2024” eventual downward revisions to job growth are not unusual when the economy is slowing caldwell says mainly because the number of firms going out of business turns out to be greater than the bls initially estimates in june average hourly wages ticked up 04 to 3358 over the past 12 months average hourly earnings have risen by 44 the average workweek for all employees on private nonfarm payrolls rose slightly to 344 hours in june up from 343 in may caldwell notes that after showing some moderation earlier in the year wage growth rebounded with the june report with average hourly earnings posting a 47 annualized increase in the last three months up from 34 in the prior three months but the fed’s source is “quite noisy and remains lower than other measures of wage growth” he says in june the unemployment rate fell 01 percentage points to 36 the unemployment rate has ranged between 34 and 37 since march 2022 “we continue to expect businesses to curtail their hiring sharply over the next year” caldwell says “employers are currently hiring too fast compared to the rate at which output is growing productivity growth has been around zero or negative which will eventually cut into profits if they don’t cut back on hiring” and with banking credit contracting and consumers likely to get more conservative over the next year in his view “there’s still much more weakening in economic activity in the pipeline” at the industry level employment growth in construction and real estate rebounded to a 27 annualized increase over apriljune up from 12 in januarymarch according to caldwell “that appears to be driven by the jump in nonresidential construction—particularly the factory building boom for green energy and semiconductors—along with a rebound in housing” employment growth in professional services tech and finance has accelerated in recent months by caldwell’s measure growth in healthcare and leisure has decelerated to a 27 rate in the last three months compared to 40 in the prior three months matching the downtrend in consumer services spending growth as the return to normal from the covid19 pandemic has largely wrapped up within the june report government jobs rose by 60000 in line with the average of 63000 jobs per month through the first half of 2023 and more than double the average of 23000 per month in 2022 employment in healthcare rose by 41000 over the month driven by job growth in hospitals nursing and residential care facilities construction jobs rose by 23000 in june above the 2023 average thus far of 15000 new jobs per month in the wake of the jobs report the bond market nearunanimously expects a rate increase from the fed according to the cme fedwatch tool which tracks bets made by traders on the direction of interest rates 95 of participants foresee the federalfunds rate rising a quarter of a point to a range of 525550 only 5 expect the fed to hold rates steady as it did in june a month ago expectations were more varied with half of participants expecting a quarterpoint rate hike in july and 35 expecting the fed to hold rates steady at its current range of 500525 at both the june and july meetings the remaining 14 expected a rise of 05 percentage points by july—a scenario that is now out of the picture “if job growth and other measures of economic activity remain at current rates and inflation proves stubbornly high then another hike in september is possible” caldwell says “employment is still expanding at a normal rate—about in line with the 17 average annual growth over 201519—but the fed would prefer something closer to zero growth for a period of time to reduce excess wage growth and cool off the broader economy” he continues “however we expect movement on both fronts to induce the fed to pause in september and the rest of the year”