The US created 206,000 jobs in June

What’s going on here?

The US created more jobs than expected in June, but that hardy showing might be hiding some inner weaknesses.

What does this mean?

The US added 206,000 jobs in June, slightly more than the expected 190,000. But April and May’s numbers were revised downward by a total of 111,000, suggesting that the labor market is weaker than June’s figure indicates. Plus, the average number of workers on payroll each month has been increasing by a lot less this year than the two before. Unemployment edged up to 4.1%, too, just a touch higher than predicted. And for those in jobs, average hourly earnings increased 3.9% from a year ago as expected – the lowest in three years.

Why should I care?

For markets: A balancing act.

The Federal Reserve (Fed) has two main responsibilities: keep prices stable and maximize employment. And while the recent increase in unemployment will be on the central bank’s radar, inflation is still the main focus. The Fed’s favored measure for that came in at 2.6% for May – the lowest since March 2021, but still above its 2% target. And reaching that goal is easier said than done. Cut rates too early, and inflation may pick up again. Leave it too late, and the economy might slow down – or even fall into a recession. That’s why traders are betting that the first cut won’t come until September.

The bigger picture: A league of their own.

Higher interest rates are a thorn in the side for companies with a lot of debt on the books, forcing them to pay more on their borrowed cash. But America’s hulking tech giants seem to be immune to the damage, boasting swollen cash piles, pumped-up profit, and runaway stock prices. When the Fed does cut interest rates, though, cheaper borrowing costs could give smaller companies the chance to compete.