US Economy Adds Just 57,000 Jobs in June as Hiring Cools

(WASHINGTON) – Job creation in the United States slowed sharply in June, with nonfarm payrolls rising by just 57,000, a figure well below expectations and one that may shift views on the health of the American economy among policymakers and trading partners in Africa and beyond.

The seasonally adjusted increase reported by the Bureau of Labor Statistics on Thursday was slower than the downwardly revised 129,000 added in May and worse than the 115,000 Dow Jones consensus forecast.

The unemployment rate dropped to 4.2 percent, slightly ahead of the 4.1 percent recorded a year ago. The move lower was largely due to a slump in the labour force participation rate, which fell 0.3 percentage point to 61.5 percent, the lowest since March 2021.

Household employment fell sharply during the month, with 507,000 fewer people reported at work. A broader unemployment measure that includes discouraged workers and those holding part time jobs for economic reasons declined by 0.2 percentage point to 7.9 percent.

Prior months also saw significant downward revisions. The May total, which had been much stronger than economists had expected, was cut by 43,000, while April’s figure came down 31,000 to 148,000. The report showed labour market growth significantly slower than previously thought.

Average hourly earnings rose 0.3 percent for the month and 3.5 percent from a year ago, both in line with consensus forecasts.

Professional and business services contributed the most, with a gain of 36,000. Social assistance added 25,000 and healthcare employment rose by 22,000, a slower than normal pace for the industry. Government jobs rose by 8,000.

Leisure and hospitality reported a loss of 61,000 jobs, which the Bureau of Labor Statistics said reflected slower than usual seasonal hiring. There had been speculation that the World Cup might provide some boost to the payroll numbers, with Goldman Sachs estimating a gain of 40,000. Most other categories showed little change.

Stock market futures rose following the report as traders eased expectations for an interest rate increase as soon as September. Treasury yields fell, with the policy sensitive two year yield down 3.5 basis points to 4.13 percent.

“The slowdown in payroll growth challenges the narrative of renewed labour 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 report comes with Federal Reserve policymakers expressing mixed feelings about the economy, mostly positive on growth though apprehensive on inflation, as earlier fears about weakness in the labour market have eased. The weak report on Thursday could change the labour market view.

In an appearance on Wednesday, Fed Chairman Kevin Warsh called the jobs picture “steady” as he continued to stress the importance of bringing inflation down to the central bank’s 2 percent target. Inflation has been running above that goal for the past five years, with the most recent surge in part due to the Iran war and ongoing effects from tariffs.

“For the Fed, this number is fine,” Thomas Simons, senior economist at Jefferies, said in a note. “The pace of job growth is plenty strong enough to maintain a steady unemployment rate and average hourly earnings are solid, but not accelerating. There is no imperative on their part to do anything with rates immediately, and the softening in the pace of job growth suggests that rate hikes are very unlikely to be necessary this year.”

Markets expect the Fed to stay on hold during the summer. Following the jobs number, traders took a potential September hike off the table though futures still point to a possible increase in October, according to the CME Group’s FedWatch gauge.

Warsh has avoided any type of forward guidance on where rates are headed and has said repeatedly during his short term at the helm that he is not committed to any particular policy path.

In other jobs news on Thursday, initial jobless claims edged lower to a seasonally adjusted 215,000 for the week ended 27 June, down 1,000 from the prior week and below the forecast for 220,000.