The United States labour market continued to show resilience in June, as job growth exceeded forecasts and the unemployment rate unexpectedly declined, dampening expectations of an imminent interest rate cut from the Federal Reserve.
According to the Bureau of Labour Statistics (BLS), nonfarm payrolls rose by a seasonally adjusted 147,000 during the month, surpassing the market forecast of 110,000 and slightly above May’s upwardly revised figure of 144,000.
April’s number was also revised higher to 158,000.
The unemployment rate edged down to 4.1%, its lowest since February, defying expectations for an increase to 4.3%.
A broader measure of unemployment, which includes discouraged workers and those working part-time for economic reasons, also fell to 7.7% - its lowest since January.
However, the improvement in jobless rates was largely attributed to a decline in labour force participation. The participation rate dropped to 62.3%, the lowest since late 2022, as the number of people not in the labour force increased by 329,000.
The household survey, used to calculate the unemployment rate, recorded a more modest employment gain of 93,000, while those not actively seeking work rose by 234,000 to 1.8 million.
Markets responded swiftly to the data, with major benchmarks rising and Treasury yields climbing.
The jobs report dealt a blow to expectations of a July interest rate cut. Following the release, traders priced in just a 4.7% chance of a rate reduction this month, sharply lower than 23.8% a day earlier, according to CME Group FedWatch Tool.
Market pricing now points to a September cut as the next likely move, and has scaled back forecasts to two cuts for the year, down from three.
Average hourly earnings rose by 0.2% for the month and 3.7% over the past year, indicating restrained wage inflation. The average workweek ticked slightly lower at 34.2 hours.
Government hiring was a key driver of payroll gains, adding 73,000 jobs - the largest of any sector - largely due to increased hiring at the state and local levels, including 40,000 new education-related positions.
The federal government, however, shed 7,000 jobs, still feeling the effects of budget tightening linked to reforms from Elon Musk’s Department of Government Efficiency.
Healthcare continued to post solid growth, adding 39,000 new positions, while social assistance added 19,000.
Construction employment rose by 15,000, whereas manufacturing contracted slightly with a loss of 7,000 jobs. Most other sectors were little changed.
The headline payroll number contrasted with Wednesday’s report from ADP, which estimated a 33,000 drop in private employment. The BLS, however, reported a gain of 74,000 in that category. Full-time jobs increased by 437,000 in June, while part-time positions fell by 367,000, suggesting improved job quality.
In related labour market data, the Labour Department said initial unemployment claims for the week ending 28 June declined to 233,000 - 4,000 fewer than the prior week and below the 240,000 forecast.
President Donald Trump, a vocal critic of the Fed’s cautious approach, reiterated his call for lower interest rates this week. In a recent Truth Social post, Trump again demanded Fed Chair Jerome Powell's resignation.
