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📝No Signs Of Recession From The Labor Market: Wells Fargo

Job gains remain widespread by industry as well. Government was the only major sector to shed jobs over the past month, with cuts coming at the federal level. However, the distribution of gains points to the economy's ongoing shift back toward in-person services as preferences change and higher interest rates bite. Hiring in construction and transportation & warehousing slowed noticeably last month, while healthcare and retail picked up and leisure & hospitality and professional & business services gains were little changed.

Wage growth also signals that the labor market is not getting significantly tighter even amid the strong hiring. Average hourly earnings rose 0.3%. Over the past three months, earnings have advanced at a 4.2% annualized pace, slower than the 5.1% 12-month pace. With consumer prices likely to have advanced 1.1% in June, we estimate real average hourly earnings for production and non-supervisory workers fell 0.8% last month and 3.4% over the past year. The still-impressive rate of job growth in recent months has blunted the hit to total consumer spending power, but even aggregate labor market earnings are losing steam and are likely to keep spending on a precarious path ahead.

Inflation remains paramount for the Fed, but the jobs market is also an important piece of the puzzle to the path ahead for policy as growth concerns mount. Today's report indicates that the jobs market remains extraordinarily strong. While the size of the FOMC's next move hangs primarily on this upcoming Wednesday's June CPI report, the June jobs report bolsters the case for another 75 bps hike at the July 27 meeting.

- Wells Fargo Economics



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