The American jobs market slowed dramatically in June, with nonfarm payrolls rising by a seasonally adjusted 57,000 for the month.
That figure fell well short of the 115,000 Dow Jones consensus forecast and was significantly slower than the downwardly revised 129,000 jobs added in May.
The Bureau of Labor Statistics released the data on Thursday, confirming that labor market growth has been considerably weaker than previously thought.
Prior months were also revised lower, with May’s total cut by 43,000 and April’s figure reduced by 31,000 to 148,000, painting a softer picture of recent hiring trends.
The unemployment rate dropped to 4.2%, though the improvement was largely driven by a fall in labor force participation rather than genuine job gains.
The labor force participation rate declined 0.3 percentage point to 61.5%, its lowest level since March 2021, suggesting more Americans stopped looking for work altogether.
Household employment plummeted during the month, with 507,000 fewer people reported as being at work across the country.
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%.
Professional and business services led sector gains with 36,000 new jobs, while social assistance added 25,000 and healthcare employment rose by 22,000.
Leisure and hospitality was the standout weak spot, shedding 61,000 jobs in what the BLS attributed to slower-than-usual seasonal hiring patterns.
There had been speculation that the World Cup might provide some uplift to payroll numbers, with Goldman Sachs estimating a potential gain of 40,000 jobs from the event.
Average hourly earnings rose 0.3% for the month and 3.5% from a year ago, both in line with consensus forecasts, offering some reassurance on wage growth.
“The slowdown in payroll growth challenges the narrative of renewed labor 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.
Stock market futures rose following the report as traders scaled back expectations for an interest rate increase as soon as September, with the policy-sensitive 2-year Treasury yield falling 3.5 basis points to 4.13%.
Fed Chairman Kevin Warsh, in an appearance on Wednesday, described the jobs picture as “steady” while continuing to stress the importance of bringing inflation back to the central bank’s 2% target.
Inflation has been running above that goal for five years, with a recent surge attributed in part to the Iran war and the ongoing impact of tariffs on prices.
“For the Fed, this number is fine,” said Thomas Simons, senior economist at Jefferies, adding that “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 now expect the Fed to hold rates steady through the summer, with traders removing a potential September hike from their expectations following the jobs release.
Warsh has repeatedly stated he is not committed to any fixed policy path and has rejected offering formal forward guidance on the direction of interest rates.
In separate data released Thursday, initial jobless claims edged lower to a seasonally adjusted 215,000 for the week ended June 27, coming in below the forecast of 220,000.