The U.S. added about half as many jobs in June as economists expected, and the unemployment rate dropped slightly, though not for an encouraging reason, in a disappointing set of results for the economy.
The Labor Department said today that just 57,000 new jobs were created, far less than the 100,000 to 115,000 that economists were expecting, and the jobless rate edged lower, to 4.2%.
The government also revised the job gains for April and May downward by an overall total of 74,000. The April figure fell 31,000, to 148,000, and the growth in May declined 43,000, to 129,000.
The report encouragingly said workers’ average hourly earnings rose by 13 cents, or 0.3%, to $37.64, and earnings were up by a solid 3.5% on a year-over-year basis, but that still kept them below the 4.1% annual rate of inflation in the most recent reading of the Personal Consumption Expenditures Price Index, the Federal Reserve’s preferred measure of the cost of living.
NMMA chief economist Shawn DuBravac told Trade Only Today that the June report provides a more honest assessment of the true underlying strength in the labor market.
“While the 57,000 number looks concerning next to very strong spring numbers, the narrative of a stable low-hire, low-fire labor market remains intact,” DuBravac said. “Layoffs remain historically low at 1.1%, so while hiring is slow, businesses are not laying off workers at an alarming rate. And the unemployment rate remains low not because people are being hired, but because fewer people are looking for work. The real trend was never 190,000 a month.
“The average gains over a longer five- or six-month period are in the 90,000 range, which is arguably stronger than the current break-even rate that keeps unemployment steady, and continue to outpace the trailing 12-month average of 36,000. So even with poor June numbers, the labor market is not in free fall,” he added.
Brian Thompson, an investor and clinical professor of economics at DePaul University, told Trade Only Today that although the jobless rate ticked down to 4.2%, “it didn’t fall because people found work — it fell because many stopped looking. Labor force participation dropped to a five‑year low, and the household survey counted roughly half a million fewer people working.
“With only 57,000 jobs added, gains narrowing to a few sectors and wages at 3.5% trailing inflation above 4%, this is a labor market that’s softening, not breaking,” he added. “It’s essentially a low‑hire, low‑fire environment where many employers have simply stopped adding workers.”
Thompson said these developments have put the Federal Reserve in a difficult position heading into its July 28-29 meeting on interest-rate policy.
“Normally, weak job numbers would argue for a rate cut, but with inflation still elevated due to the Iran energy shock, they can’t ease without risking additional inflationary pressure,” he said. “I expect them to hold rates and maintain hawkish language. Looking across large ticket‑price items — especially those that are rate‑sensitive — it seems unlikely that cheaper money is coming anytime soon.”
DuBravac agreed that the jobs report diminishes the probability that the Fed will change rates at the July meeting.
“Inflation isn’t showing up in the wage data in a concerning way,” he said. “The Fed will likely hold, while acknowledging slower hiring and energy-induced inflationary pressures, which is now starting to reverse.”
In its June Consumer Confidence Index report, The Conference Board found that the percentage of those it surveyed who said jobs are “hard to get” rose to 22.5%, the highest since January 2021.
Thompson said there are two reasons for that. People who now have jobs can’t find better ones because hiring has frozen across many sectors of the economy, and new college grads “are locked out because a low‑hire market disproportionately affects new entrants.”
DuBravac agreed that there are several pressures on the labor market that are making jobs feel hard to get.
“Hiring is much slower than it has been in the past, even with a temporary pickup this spring,” he said. “Companies are laying off at a low rate, but many of the headlines suggest that industries like technology are laying off at a much faster clip than they are. It’s easy to assume that layoffs are happening everywhere, when the actual data suggest otherwise. Employees are also not quitting at a high rate, making job openings less available.
“But for certain segments of the population, it does look like jobs might be harder to find,” he added. “This is especially true for entry-level jobs. Youth unemployment remains roughly double the national rate. Recent grads are competing for a shrunken pool of first jobs. The long-term unemployed are 27% of all unemployed, so they are struggling to regain employment.”
Separately, the National Federation of Independent Business said last month that only a seasonally adjusted net 9% of its member owners reported in May that they plan to create new jobs in the following three months, down 4% from April and marking the lowest level since May 2020.
“Small business owners are pulling back on hiring for straightforward reasons: relatively expensive borrowing, rising fuel and input costs, and considerable uncertainty around the consumer going forward,” Thompson said. “All of this translates into lower business spending and less willingness to invest in new hires. In boating, higher fuel and financing costs act as substantial barriers to new buyers and current buyers alike.”
DuBravac said he believes that one of the reasons that small businesses are not hiring is “because they are still in triage mode, after spending over a year trying to understand how tariffs are going to impact them and making adjustments accordingly. They have now spent the last six months trying to address higher input costs. Small businesses are hesitant to hire because their cost structure has been uncertain, and until that resolves, I think they will remain reticent to hire.”
The professional and business services category led the economy with a gain of 36,000 jobs in June. Social assistance added 25,000 jobs, and the health care category — frequently the top gainer during the past few years — added 22,000.
The leisure and hospitality category, which had added 70,000 jobs in May, unexpectedly lost 61,000 in June, reflecting what the Labor Department said was “weaker than usual seasonal hiring” despite the arrival of the World Cup soccer tournament. The quadrennial event, hosted this year by the U.S., Canada and Mexico, had been expected to give the sector a boost, at least while the June 11-July 19 event lasts.
DuBravac said the drop in leisure and hospitality employment “could be payback for World Cup hiring and other seasonal hiring that was pulled earlier into April and May.”
