US adds just 57,000 jobs in June, missing forecasts by wide margin

The US labor market added just 57,000 jobs in June, less than half the 110,000 economists expected, while downward revisions to prior months erased another 74,000 positions from the spring hiring surge.

"The jobs picture probably isn't as strong as the previously reported gains intimated, but it's also likely not as challenging as the June report and its accompanying revisions suggest," Jim Baird, chief investment officer at Plante Moran Financial Advisors, said.

The unemployment rate ticked down to 4.2% from 4.3%, driven largely by a 0.3 percentage-point drop in the labor force participation rate to 61.5% — the lowest since March 2021. The Bureau of Labor Statistics revised April's payrolls down to 148,000 from 179,000 and May's to 129,000 from 172,000. Average hourly earnings rose 0.3% month over month, matching May's pace, and were up 3.5% from a year earlier.

The data lands as the Fed weighs its next move against the backdrop of persistent inflation — the Personal Consumption Expenditures index hit 4.1% in May, the highest since April 2023. Most forecasters expect the central bank to hold the federal funds rate at 3.5% to 3.75% at its July 31 meeting, though about 18% still price a quarter-point hike.

Leisure and hospitality posts surprise decline

The leisure and hospitality sector shed 61,000 jobs in June, a reversal from May when it led all industries in hiring. The drop surprised analysts because the US hosting the World Cup was expected to boost employment at hotels, bars and restaurants. Bank of America economist Shruti Mishra had warned that May's surge could have been driven by Memorial Day timing, meaning June could see payback. Thrivent Chief Financial and Investment Officer David Royal said state-level data did not support the view that the World Cup drove the spring gains.

Professional and business services added 36,000 jobs, social assistance grew by 25,000 and health care added 22,000 — below its average monthly gain of 38,000 over the past year. Construction, manufacturing and financial activities showed little change.

Long-term unemployment remains elevated

The number of Americans out of work for 27 weeks or more stood at 1.9 million in June, up 286,000 over the past year. ZipRecruiter economist Nicole Bachaud said employers may prefer to hire workers who recently left a job rather than those who have been unemployed for extended periods, contributing to a "no hire, no fire" dynamic. Job openings edged up to 7.594 million in May from a revised 7.585 million in April, according to BLS data released June 30.

The labor force participation rate's decline to 61.5% reflects a shrinking domestic labor pool as older workers retire and immigration slows. LinkedIn's head of economics for the Americas, Kory Kantenga, said the drop in the unemployment rate reflected fewer quits and layoffs in June, strengthening the case that recent payroll gains will hold up despite the revisions.

The last time the participation rate was this low was in March 2021, when the economy was still emerging from pandemic-era restrictions. Since then, the Fed has raised rates by more than 500 basis points and held them at restrictive levels, yet the labor market has proven more resilient than many forecasters anticipated. The June report suggests that resilience may be fraying at the edges, even if the broader picture remains one of an economy operating near full employment.

This article is for informational purposes only and does not constitute investment advice.