US Job Growth Slows Sharply as June Payrolls Miss Forecasts

US job creation slowed significantly in June as payroll growth missed forecasts, while unemployment eased to 4.2%, keeping the Federal Reserve on course for a cautious policy stance.

US Job Creation Slows

The United States labor market lost momentum in June after employers added just 57,000 non-farm jobs, marking the weakest monthly payroll growth in four months and falling well below market expectations.

According to the Bureau of Labor Statistics, June’s payroll increase was significantly lower than the downwardly revised 129,000 jobs recorded in May and also missed economists’ expectations of around 110,000 to 115,000 new positions.

Despite the slower pace of hiring, the unemployment rate unexpectedly edged down to 4.2% from 4.3% in May. The decline was largely driven by a shrinking labor force rather than stronger employment conditions, as around 720,000 people exited the workforce.

The labor force participation rate fell to 61.5%, its lowest level since March 2021, while the employment-population ratio slipped to 59.0%, the weakest reading in more than four years.

Professional and business services led employment gains with 36,000 new jobs, followed by social assistance with 25,000 and health care with 22,000. However, leisure and hospitality shed 61,000 positions, reflecting weaker seasonal hiring and the likely impact of the 2026 FIFA World Cup on staffing patterns.

Separate labor market data showed initial jobless claims declined to 215,000 during the week ending June 27, marking a five-week low and coming in below market expectations. Continuing unemployment claims, however, increased slightly to 1.814 million, the highest level in three months, indicating some unemployed workers are taking longer to find new jobs.

Analysts believe the latest employment report points to a moderating but still resilient labor market. Wage growth remains steady without showing signs of accelerating inflationary pressure, reducing the urgency for the Federal Reserve to alter monetary policy at its July meeting.

Nevertheless, financial markets continue to price in the possibility of an interest rate increase in September should economic conditions strengthen later in the year.