The U.S. economy saw job creation cool sharply heading into the summer, the Bureau of Labor Statistics reported Thursday.
Nonfarm payrolls for June increased by a seasonally adjusted 57,000 for the month, slower than the downwardly revised 129,000 added in May and worse than the 115,000 Dow Jones consensus forecast.
The unemployment rate, however, dropped to 4.2%, and slightly ahead of the 4.1% where it was a year ago.
The move lower was largely due to a slump in the labor force participation rate, which dropped 0.3 percentage point to 61.5%, the lowest since March 2021. Household employment plummeted 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%.
Prior months also saw significant downward revisions — the May total, which had been much stronger than economists had anticipated, was cut by 43,000, while April's figure came down 31,000 to 148,000 as the report showed labor market growth significantly slower than previously thought.
Average hourly earnings rose 0.3% for the month and 3.5% from a year ago, both in line with the consensus forecasts.
Professional and business services contributed the most, with a gain of 36,000. Social assistance added 25,000 and health care employment rose by 22,000, a slower-than-normal pace for the industry. Government jobs rose by 8,000.
However, leisure and hospitality reported a loss of 61,000 jobs, which the BLS 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.
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 labor market have eased. However, the weak report Thursday could change the labor market view.
In an
appearance Wednesday, Fed Chairman Kevin Warsh called the jobs picture "steady" as he continued to emphasize the importance of bringing inflation down to the central bank's 2% target. Inflation has been running north of that goal for the past five years, with the most recent surge in part due to the Iran war and ongoing impacts from tariffs.
Markets expect the Fed to stay on hold during the summer but currently are pricing in a solid chance of a quarter percentage point rate hike in September. However, Warsh has eschewed 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 type of policy path.
Correction: The unemployment rate was 4.3% in May. An earlier version mischaracterized the recent trend.
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<small>Source: CNBC</small>
