Is hiring picking up in the US? Thursday’s report will help illustrate trends

WASHINGTON (AP) — Is the U.S. economy emerging from a period of sluggish hiring to something more dynamic? Thursday’s report from the Labor Department on June job changes will provide some important clues.

The report could show that 100,000 new jobs were added last month, according to a survey of economists by data provider FactSet. If so, it would be the fourth straight month of solid hiring, after a string of weak months late last year through February, when employers actually shed jobs. The unemployment rate is forecast to have stayed a low 4.3% in June.

Yet some economists expect a stronger figure as companies have adjusted to a series of challenges — higher tariffs, the Iran war, widespread AI investment — and are increasingly confident that the economy will keep growing. In the three months from March through May, employers added an average of 188,000 jobs a month, a significant pickup from an average loss of 4,000 in the preceding three months from December through February.

“Even though it’s still kind of a challenging market … the understanding of where things are headed, it has calmed down a bit,” said Nicole Bachaud, labor economist at ZipRecruiter. “And so businesses are able to now execute on hiring plans.”

Still, inflation is at a three-year high of 4.2%, lifted by spiking gas prices, and that has eroded Americans’ incomes. Inflation-adjusted after-tax incomes were flat in May from a year earlier, which could discourage some consumers from spending.

But a healthy labor market that can continue to generate jobs should enable many consumers, particularly upper-income ones, to remain resilient and spend more, boosting the economy.

The inflation-fighters at the Federal Reserve, however, are under increasing pressure to raise rates to slow the economy and combat inflationary pressures. Now that gas prices are headed lower with the peace agreement between the United States and Iran, inflation should start to cool and many Fed officials will want to see how much closer it can get to the Fed’s 2% target before raising rates.

Still, other officials say that solid job growth is a sign that the Fed’s key rate — currently about 3.6% — may not be restraining the economy or cooling inflation pressures.

Historically, average job gains of 188,000 a month wouldn’t be seen as that strong. Yet as more Americans retire and new immigration has dropped sharply, the U.S. workforce is barely growing. In that case, hiring at about 100,000 new jobs a month may be enough to keep the unemployment rate unchanged — or even lower it.

There are some wild cards that could affect the June data. In May, employers added 172,000 jobs, with 70,000 of those new positions at restaurants, bars, and hotels. And local governments added 55,000 jobs. Both gains, particularly in local government, were higher than normal and economists think it’s unlikely they’ll be repeated.

Some analysts speculate the May job gains at restaurants and hotels reflected additional hiring in preparation for the World Cup, which began June 11th. If so, the large gain would be unlikely to happen again. Yet many economists say that while the World Cup may have sparked more hiring in the cities hosting the event, it hasn’t been large enough to affect the national data.

The ongoing adoption of artificial intelligence has led to widespread worries that it will replace many workers and reduce employment. Yet so far there haven’t been widespread layoffs stemming from AI adoption, and economists argue that it could make many workers more efficient at their jobs instead.

Bachaud said AI adoption could have encouraged a trend she’s noticed on their website: Companies are increasingly posting jobs seeking more senior, experienced workers, while job hunters are instead gravitating toward entry-level jobs.

With far fewer people quitting their jobs than just after the pandemic, Bachaud said, companies are having more trouble recruiting experienced workers from other businesses. At the same time, that’s left less-experienced workers struggling to break into the job market.

That gap “just shows the mismatch between what employers are looking for and what current job seekers have to offer,” she said. It has likely contributed to the frustration many job seekers feel even as the unemployment rate remains low.