• US job growth slows, raising concerns over impact of higher interest rates
• Unemployment rate remains steady at 3.6%
• Labor market shows signs of cooling with decline in employment openings

Last month, job growth in the United States slowed, indicating that higher interest rates may be beginning to impact the world’s largest economy.

The Labour Department reported that employers added 209,000 positions in June, the smallest increase in more than two years.

The unemployment rate fell from 3.6% in May to 3.6% in June, which was less than anticipated.

As the US central bank raises interest rates to combat inflation, the labor market is being closely observed.

Despite the Federal Reserve’s benchmark interest rate rising to over 5% in less than a year, hiring has remained robust.

This was the case in June when analysts stated that the 209,000 positions added were sufficient to accommodate growth in the labor force, despite being the lowest number since December 2020.

A year ago, the average hourly wage was 4.4% higher than it is currently.

However, other data, such as a decline in the number of employment openings, suggest that the labor market may be cooling.

Richard Flynn, managing director of Charles Schwab UK, said, “Today’s employment report is slightly weaker than anticipated.

“The labor market remains tight, but investors will likely interpret these numbers as a sign of emerging cracks.”

Economists have been projecting a slowdown for months as higher interest rates force consumers to reduce spending in other areas and make it more expensive to borrow money for business expansions.

But job growth has consistently exceeded expectations, and a robust hiring report from private payroll processor ADP earlier this week has raised hopes for a continuation.

The ADP data resulted in a decline in share prices on Thursday, as investors reassessed the likelihood of a rate hike.

The report from the Labour Department, however, painted a somewhat different picture, indicating that the government and healthcare industries drove recruiting in June.

Retailers and transport companies lost jobs, whereas the leisure and hospitality industry added just 21,000 positions, maintaining the sector’s overall employment below pre-pandemic levels.

Analysts continue to anticipate that the Federal Reserve will raise interest rates at its meeting this month.

Although U.S. inflation has declined significantly since last year, at 4% it remains above the Federal Reserve’s 2% target.

The bank’s most recent forecasts indicated that the majority of officials believed they would need to raise interest rates to stabilize prices.

“Even though employment growth has slowed, it remains too robust to justify an extended Fed pause.” Moreover, with average hourly earnings exceeding expectations, wage pressures remain excessive, according to Seema Shah, chief global strategist at Principal Asset Management.

“Today’s report provides the Fed with little reason to delay a rate hike at its July meeting,”