ALBAWABA – Strong preliminary private-sector employment in June, in the United States (US), indicates another hike in US interest rates is likely to be announced soon, given the data issued by payroll firm ADP, released Thursday.
Rising private sector recruitment indicates that the labor market is still hot, contrary to expectations, in spite of the Federal Reserve (Fed) aggressively raising US interest rates for more than a year.
In June, 497,000 new jobs were filled in the private sector, according to ADP, as reported by Agence France-Presse (AFP). This is more than double the median forecast of economists surveyed by MarketWatch, estimated at 220,000.
The leisure and hospitality sector alone was responsible for 232,000 new jobs, followed by the construction and trade, transportation and utilities sectors, according to AFP.
Hiring in June almost doubled from May’s revised 267,000 new private sector jobs, AFP reported.
The dramatic June figure was almost double the figure from last month, when a revised 267,000 new private sector jobs were created.
Meanwhile, wages grew at a somewhat slower rate, compared to May, recording a year-on-year increase of 6.4 percent in June, down from 6.6 percent the month before.
Wage gains also slowed for people who changed jobs for the 12th straight month, to an annual rate of 11.2 percent.
"Net, private payrolls rose more than expected in June," High Frequency Economics' chief US economist Rubeela Farooqi wrote in a note to clients, carried by AFP.
"Consumer-facing service industries had a strong June, aligning to push job creation higher than expected," ADP chief economist Nela Richardson said in a statement.
She said that recent public and private sector hiring figures "show the economy is still creating jobs at an elevated pace, signaling demand for labor is still strong."
"We expect payrolls to remain positive for now. But a deceleration is likely as the lagged and cumulative efects of monetary policy filter through more broadly through the economy," she added.
The Fed raised US interest rates 10 times since March 2022 and pinned them in June to give policymakers more time to assess the impact of these hikes on the economy.
Labor market data is showing signs of the economy being in stronger shape than many people were predicting. Higher employment rates and wages usually mean higher inflation, and vice versa.
