The US economy added just 57,000 jobs in June, falling well short of the 115,000 that economists had expected and marking a sharp drop from the previous month, according to a report by CNBC citing Bureau of Labor Statistics data released Thursday.
The number was also significantly below the downwardly revised 129,000 jobs added in May. That May figure itself had been cut by 43,000 from an earlier estimate, while April's count was revised down by 31,000 to 148,000. Together, the revisions paint a picture of labor market growth that was considerably weaker than previously reported.
The unemployment rate fell to 4.2%, down slightly from 4.1% a year ago. But that decline came with a caveat. The labor force participation rate dropped 0.3 percentage points to 61.5%, its lowest level since March 2021. Household employment fell by 507,000 during the month. A broader measure of unemployment that includes discouraged workers and those holding part-time jobs for economic reasons declined by 0.2 percentage points to 7.9%.
Leisure and hospitality led the losses, shedding 61,000 jobs. The Bureau of Labor Statistics attributed that to slower-than-usual seasonal hiring. There had been some expectation that the FIFA World Cup would boost hiring in that sector, with Goldman Sachs estimating a gain of around 40,000 jobs tied to the event. That did not materialize. Professional and business services posted the largest gain at 36,000, followed by social assistance at 25,000 and healthcare at 22,000, which the report noted was a slower-than-normal pace for that industry. Government employment rose by 8,000.
Average hourly earnings rose 0.3% for the month and 3.5% from a year ago, both in line with forecasts.
Markets responded quickly to the weak headline number. Stock futures rose after the report as traders reduced expectations for an interest rate increase as soon as September. Treasury yields fell, with the policy-sensitive 2-year yield dropping 3.5 basis points to 4.13%.
The report lands at a complicated moment for Federal Reserve policymakers. Fed Chairman Kevin Warsh, in an appearance Wednesday, described the jobs picture as "steady" while continuing to stress the importance of bringing inflation down to the central bank's 2% target. Inflation has been running above that goal for five years, with recent increases tied in part to the Iran war and the ongoing effects of tariffs.
"The slowdown in payroll growth challenges the narrative of renewed labor market strength that has been building in recent months but, importantly, reinforces the view that the Federal Reserve is under little pressure to tighten policy," said Seema Shah, chief global strategist at Principal Asset Management.
The June jobs report is the latest data point the Fed will weigh as it considers its next move on interest rates. Its next scheduled policy meeting has not yet produced a firm timeline for action, but Thursday's numbers are likely to shift the internal debate.
