U.S. economy adds 57,000 jobs in June

The U.S. economy added fewer jobs than anticipated in June, while the unemployment rate fell, according to figures on Thursday that could factor into how the Federal Reserve approaches monetary policy decisions in the coming months.

Total nonfarm payrolls rose by 57,000 last month, below forecasts of 114,000, data from the Labor Department’s Bureau of Labor Statistics showed. Strength in professional and business services, social assistance and health care helped to offset a seasonal decline in hiring in leisure and hospitality.

Employment in accommodation and food services dropped by 55,000 in particular, a notable decline given the backdrop of the ongoing FIFA World Cup soccer tournament and upcoming Independence Day celebrations on July 4th, analysts at Capital Economics flagged.

May’s payrolls number was also revised down by 43,000 to 129,000. When combined with a separate downward adjustment in April, employment in the two months before June was 74,000 lower than previously reported.

The jobless rate, meanwhile, inched down to 4.2%, versus estimates of 4.3% — a level it has been at since March. The labor participation rate decreased by 0.3 percentage point to 61.5%, and the employment-to-population ratio edged down to 59%, the BLS said.

“There was little consolation to be taken in the tick down in the unemployment rate,” the Capital Economics analysts said.

June’s soft payrolls total breaks a three-month streak of better-than-anticipated jobs figures. Given these recent signs of job market resilience, traders have wagered that Fed policymakers, eager to prevent energy-driven inflationary pressures from intensifying, could have more room to hike rates this year.

But the latest NFP reading could dent that hawkish outlook, shifting expectations to between zero to one rate lifts in 2026, compared to prior estimates of one to two increases, analysts at Vital Knowledge said in a note.

The combination of relatively soft labor conditions and the sharp fall in oil should finally bring material yield relief to equities,” they wrote. Wall Street stock futures pointed higher after the payrolls report, while benchmark 10-year and rate-sensitive 2-year U.S. Treasury yields decreased. Yields tend to move inversely to prices.

Prior to the release, financial markets had been pricing in about a 50.7% chance that the Fed could raise rates at its September meeting. In June, the central bank left rates unchanged at a range of 3.5% to 3.75%, although fresh projections indicated that officials anticipated an increase sometime this year.

In theory, raising rates can help to corral inflation, which policymakers have feared could accelerate due to a spike in oil prices following the start of a joint U.S.-Israeli assault on Iran in late February.

Yet crude prices have slipped back to around pre-conflict levels since the signing of a framework peace deal between the U.S. and Iran in June, soothing some of these fears. Speaking on Wednesday, new Fed Chair Kevin Warsh suggested that inflation risks had come down — although he declined to provide forward guidance on rates.

Along with keeping a lid on inflation, the Fed is tasked with calibrating rates to promote maximum employment. An uptick in rates could place a drag on the broader economy and, in turn, weigh on hiring activity.
On the whole, the June jobs data presents the Fed with the portrait of an American labor market that has “stabilized in recent months” but is “not yet reaccelerating,” the Capital Economics analysts including Bradley Saunders said.