U.S. hiring slowed in June as payrolls rose by 57,000

U.S. employers added far fewer jobs than expected in June, a fresh sign that the labor market lost speed heading into summer, according to the Bureau of Labor Statistics. For everyday investors, the report matters because labor data feeds directly into Federal Reserve rate decisions, which can affect borrowing costs, bond yields and stock valuations.

Nonfarm payrolls, a measure of jobs at most private and government employers outside farming, rose by a seasonally adjusted 57,000 in June, the BLS said Thursday. That was below the Dow Jones consensus estimate of 115,000 and down from a revised 129,000 jobs in May.

The unemployment rate fell to 4.2% from 4.3% in May, according to the BLS. That headline drop came with a softer detail underneath: the labor force participation rate, which measures the share of people working or looking for work, declined 0.3 percentage point to 61.5%, its lowest level since March 2021.

The household survey, a separate BLS measure from the payroll survey, showed 507,000 fewer people employed in June. A broader unemployment gauge that includes discouraged workers and people working part time because they cannot find full-time work moved down 0.2 percentage point to 7.9%.

Revisions made the jobs picture look weaker

The BLS also reduced its estimates for earlier months. May payroll growth was cut by 43,000. April was revised lower by 31,000 to 148,000. Those changes showed a slower labor market than previously reported.

Wage growth matched expectations. Average hourly earnings rose 0.3% from May and 3.5% from a year earlier, according to the BLS.

Hiring was uneven across industries. Professional and business services added 36,000 jobs, the largest gain among major groups. Social assistance added 25,000, healthcare added 22,000 and government employment rose by 8,000.

Leisure and hospitality cut 61,000 jobs. The BLS said the decline reflected weaker-than-usual seasonal hiring. CNBC reported that some investors had watched for a possible World Cup-related lift to payrolls, including a Goldman Sachs estimate of a 40,000-job boost.

Markets read the report through the Fed

CNBC reported that stock market futures rose after the jobs data, while Treasury yields fell. The policy-sensitive 2-year Treasury yield was down 3.5 basis points to 4.13%. A basis point is one-hundredth of a percentage point.

The market reaction centered on the Federal Reserve. A softer labor market can reduce pressure on the Fed to raise interest rates, because higher rates are used to slow demand and fight inflation. Rates also influence what investors are willing to pay for future corporate earnings.

Seema Shah, chief global strategist at Principal Asset Management, said the payroll slowdown challenged recent signs of renewed labor strength and supported the view that the Fed is under little pressure to tighten policy.

Thomas Simons, senior economist at Jefferies, wrote in a note that the report gave the Fed little reason to move rates immediately. He said job growth was strong enough to keep unemployment steady, while wages were solid without accelerating.

Fed Chair Kevin Warsh had described the jobs picture as steady in an appearance Wednesday, according to CNBC, while continuing to stress the Fed’s 2% inflation goal. CNBC reported that inflation has remained above that target for five years, with recent pressure tied partly to the Iran war and tariff effects.

After the report, traders removed a September rate increase from market pricing, though futures still pointed to a possible October increase, according to CME Group’s FedWatch gauge. CNBC reported that Warsh has avoided giving a fixed path for policy.

In a separate labor-market release Thursday, initial jobless claims fell 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.