According to the Bureau of Labor Statistics, nonfarm payrolls for June rose by a seasonally adjusted 57,000, a sharp decline from the revised 129,000 in May and below the Dow Jones consensus forecast of 115,000.
The unemployment rate fell to 4.2%, slightly better than the previous year’s 4.1%, but this decrease was largely attributed to a drop in the labor force participation rate, which fell 0.3 percentage points to 61.5%, the lowest since March 2021. Household employment saw a significant decline, with 507,000 fewer individuals reported as working.
A broader measure of unemployment, which includes discouraged workers, also decreased to 7.9%. Additionally, prior months' job growth figures were revised downward, indicating a slower labor market than previously thought. Average hourly earnings increased by 0.3% for the month and 3.5% year-over-year, aligning with forecasts.
The professional and business services sector added the most jobs, while leisure and hospitality saw a loss of 61,000 jobs, attributed to slower seasonal hiring. Following the report, stock market futures rose as traders adjusted their expectations for interest rate hikes, with the policy-sensitive 2-year Treasury yield falling to 4.13%.
Seema Shah, chief global strategist at Principal Asset Management, noted that the slowdown in payroll growth challenges the narrative of a robust labor market but suggests the Federal Reserve may not feel pressured to tighten monetary policy.
Fed Chairman Kevin Warsh previously described the jobs situation as 'steady,' emphasizing the need to control inflation, which has exceeded the Fed's 2% target for five years. Economists believe the current job growth pace is sufficient to maintain the unemployment rate, and the likelihood of immediate rate hikes appears low, with markets anticipating the Fed will remain on hold through the summer