U.S. job growth slows in June, easing expectations of Fed rate hike; unemployment rate falls to 4.2%
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- U.S. employers added just 57,000 non-farm jobs in June, well below the 110,000 economists had forecast, with May and April gains revised down by a combined 53,000.
- The unemployment rate fell to 4.2% from 4.3%, but that decline came because roughly 720,000 people left the labor force, pushing the participation rate to 61.5%—its lowest since March 2021.
- Traders cut the implied probability of a July Federal Reserve rate hike to under 20% and reduced September hike odds to about 60%, down from roughly 75% before the report.
- FWDBONDS chief economist Christopher Rupkey said Fed policymakers "plainly won't like" the employment report and attributed the slowdown to a delayed reaction to the Middle East war.
- Leisure and hospitality employment dropped 61,000 jobs in June, bucking expectations that FIFA World Cup preparations would boost sector hiring.
- Sector hiring was led by professional and business services (+36,000), followed by social assistance (+25,000) and health care (+22,000)—below that sector's 38,000 monthly average over the prior year.
Why it matters: The unemployment rate fell to 4.2%, but only because 720,000 people left the labor force—pushing participation to its lowest since March 2021. As Rupkey put it, Fed policymakers "plainly won't like" a report where the headline improvement masks shrinking labor supply and weaker-than-expected hiring across sectors.
