US hiring slows to 57,000 jobs in June as labor supply shrinks

U.S. employers added a seasonally adjusted 57,000 jobs in June, the Bureau of Labor Statistics said Thursday, well below May’s revised 129,000 gain and the 115,000 increase expected by economists polled by Dow Jones. Stock futures rose after the release and Treasury yields fell, with the two-year yield down 3.5 basis points to 4.13%, as traders reduced bets on a Federal Reserve rate increase as soon as September.

The unemployment rate declined to 4.2% from 4.3% in May, according to the BLS, though it remained above the 4.1% rate recorded a year earlier. The decline came alongside a 0.3 percentage point drop in the labor force participation rate to 61.5%, the lowest level since March 2021.

The unemployment rate is calculated from the household survey and counts only people in the labor force, meaning those working or actively looking for work. When participation falls, the jobless rate can decline even if employment weakens. The BLS household survey showed 507,000 fewer people employed in June.

A broader measure of unemployment, which includes discouraged workers and people working part time for economic reasons, fell 0.2 percentage point to 7.9%, the BLS said.

Revisions point to slower hiring

The June report also reduced prior estimates. May payrolls were revised down by 43,000, and April’s total was cut by 31,000 to 148,000, according to the BLS. The revisions suggested that job growth in the spring was weaker than earlier reported.

Average hourly earnings increased 0.3% from May and 3.5% from a year earlier. Both figures matched consensus expectations cited by Dow Jones.

Hiring was concentrated in a limited number of sectors. Professional and business services added 36,000 jobs, the largest gain among major categories. Social assistance payrolls rose by 25,000, and health care employment increased by 22,000, which CNBC reported was slower than the industry’s usual pace. Government employment rose by 8,000.

Leisure and hospitality payrolls fell by 61,000. The BLS attributed the decline to seasonal hiring that was weaker than usual. CNBC reported that Goldman Sachs had estimated the World Cup could add 40,000 jobs to the June payroll count, though the sector data did not show such a lift. Most other categories registered little change, according to the BLS.

Fed expectations shift after the data

The report arrived as Federal Reserve officials have expressed confidence in growth while remaining concerned about inflation, according to CNBC. Chair Kevin Warsh said Wednesday that the labor market looked “steady” and reiterated the central bank’s focus on returning inflation to its 2% target. CNBC reported that inflation has been above that goal for five years, with recent pressure linked in part to the Iran war and tariff effects.

Seema Shah, chief global strategist at Principal Asset Management, said the payroll slowdown challenged the recent view that labor market strength was improving, while reinforcing the case that the Fed was under limited pressure to tighten policy.

Thomas Simons, senior economist at Jefferies, wrote that the data gave the Fed little reason to adjust rates immediately. “The pace of job growth is plenty strong enough to maintain a steady unemployment rate and average hourly earnings are solid, but not accelerating,” Simons said in a note. He added that slower hiring made rate increases this year “very unlikely.”

Futures pricing tracked by CME Group’s FedWatch tool showed traders no longer expected a September increase after the jobs release, while still assigning some probability to an October move, according to CNBC. Warsh has said he is not committed to a preset policy path.

In a separate labor-market release Thursday, initial claims for unemployment benefits slipped by 1,000 to a seasonally adjusted 215,000 for the week ended June 27, below the 220,000 forecast.

This story draws on original reporting from CNBC.