The US economy added just 57,000 jobs in June, well below economists’ expectations, in a sign that the labor market is losing momentum even as the unemployment rate unexpectedly declined a notch.
Data released by the Labor Department on Thursday showed nonfarm payrolls increased by 57,000 in June, less than half the 115,000 jobs forecast by economists polled by Dow Jones.
At the same time, the unemployment rate edged down to 4.2%, compared with expectations for it to remain at 4.3%.
The unemployment rate edged lower largely because fewer people were participating in the labor force.
The labor force participation rate fell 0.3 percentage point to 61.5%, its lowest level since March 2021.
At the same time, household employment declined sharply, with 507,000 fewer people reporting that they were employed during the month.
Meanwhile, the broader U-6 unemployment rate, which includes discouraged workers and those working part time for economic reasons, eased 0.2 percentage point to 7.9%.
The weaker-than-expected payroll growth comes after several months of resilient hiring and was accompanied by sizable downward revisions to previous employment reports, suggesting labor market conditions have been softer than initially estimated.
Hiring remains concentrated in a handful of sectors
Despite the slowdown, several industries continued to add workers.
Professional and business services led employment gains with 36,000 new jobs, extending a recovery that has seen the sector add 172,000 positions since reaching a recent low in October 2025.
Social assistance employment increased by 25,000, driven largely by individual and family services, which added 17,000 jobs.
Over the past year, the sector has averaged monthly gains of about 16,000 jobs.
Healthcare also remained a source of hiring, although growth moderated.
The sector added 22,000 jobs in June, below its average monthly increase of 38,000 over the previous year.
Hospitals accounted for roughly 9,000 of those additions.
In contrast, leisure and hospitality lost 61,000 jobs, reflecting weaker-than-normal seasonal hiring, despite the US co-hosting the FIFA World Cup.
The industry has recorded little overall employment growth so far in 2026, pointing to softer consumer-facing demand.
Wage growth remains steady despite weaker hiring
Average hourly earnings for private-sector workers increased by 13 cents, or 0.3%, in June to $37.64, leaving annual wage growth at 3.5%.
Production and nonsupervisory workers saw hourly earnings rise by 7 cents, or 0.2%, to $32.38.
While wage gains remain above inflation, Federal Reserve officials have generally argued that labor costs are no longer a significant source of inflationary pressure.
Policymakers have instead pointed to higher energy prices linked to the conflict involving Iran and massive infrastructure spending tied to the artificial intelligence boom as emerging inflation risks.
Previous payroll estimates revised lower
The latest report also painted a weaker picture of recent hiring through downward revisions.
April payroll growth was revised down by 31,000 jobs, from 179,000 to 148,000, while May employment gains were lowered by 43,000, from 172,000 to 129,000.
The revisions reinforce signs that labor demand has been cooling more steadily than earlier reports suggested.
On Wednesday, Federal Reserve Chairman Kevin Warsh also said that the US labor market remains “steady” and dismissed fears that artificial intelligence will trigger widespread job losses.
Speaking at a central banking forum in Portugal, he argued that major technological advances have historically created more jobs and boosted prosperity over time.
Markets scale back July rate hike expectations
The weaker jobs data prompted investors to sharply reduce expectations that the Federal Reserve will raise interest rates at its July policy meeting.
Following the report, traders assigned less than a 20% probability of a July rate increase.
“The headline gain of 57,000 jobs is clearly disappointing, but it follows a familiar pattern. In 2024 and 2025, job growth averaged about 124,000 per month between March and May before slowing to an average of just 34,000 jobs in June. That pattern was one of the reasons the Fed opted for a 50 basis point insurance rate cut in September 2024. Ironically, today’s report may be one reason the Fed does not deliver insurance rate hikes at the September FOMC meeting.”
“This report alone is not enough to take a rate hike off the table, but it may be enough to push the timing out,” he said.
Markets continue to see September as the more likely window for additional tightening, with futures implying roughly a 60% chance of another rate hike, down from around 75% before the payroll data were released.
The softer employment figures add to growing evidence that higher borrowing costs are weighing on hiring, potentially reducing the urgency for policymakers to tighten monetary policy further in the near term.
Jobless claims remain low
Separate Labor Department data released on Thursday showed employers continue to refrain from broad-based layoffs despite slower hiring.
Initial claims for unemployment benefits totaled 215,000 in the week ended June 27, slightly below the prior week’s 216,000 reading and ahead of economists’ expectations for 220,000 claims.
Continuing claims, which reflect the number of people receiving ongoing unemployment benefits, held steady at 1.81 million in the week ended June 20, indicating that while hiring has cooled, layoffs remain relatively limited.
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