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 forecast; May was revised down from 172,000 to 129,000 and April was cut by 31,000 to 148,000.
- The unemployment rate fell to 4.2% from 4.3%, but only because roughly 720,000 people left the labor force, dropping participation to 61.5% — the lowest since March 2021.
- Traders cut the implied probability of a Fed rate hike this month to under 20% and a September hike to about 60%, down from roughly 75% before the report.
- Christopher Rupkey, chief economist at FWDBONDS, said the Fed 'won't like this employment report' and suggested the slowdown may be a 'delayed reaction to the war in the Middle East.'
- Economists estimate the economy now needs to create only zero to 50,000 jobs per month to keep up with the working-age population, as an immigration crackdown has shrunk the labor force.
- Leisure and hospitality lost 61,000 jobs despite hopes the FIFA World Cup would boost hiring; healthcare added just 22,000 (below its 38,000 monthly average), while professional and business services led gains at 36,000.
- A Conference Board survey released Tuesday showed the share of consumers viewing jobs as 'hard to get' near a 5-1/2-year high in June.
Why it matters: The Fed's quarterly projections pointed to a rate hike from 3.50–3.75% this year, but a 57,000 June payroll print with downward revisions and a 720,000-person labor force drop weaken the case for tightening. Workers aren't being laid off, but the economy isn't generating enough jobs to absorb even a shrinking population.
