Nonfarm payrolls rose by 57k in June, lower than the Bloomberg consensus forecast of 113k. Revisions to the two prior months were 74k lower.
- Smoothing through volatility, payrolls averaged 111k over the last three months, stronger than the 42k averaged over the last twelve months.
Private payrolls rose 49k, slower than the 97k recorded in May. Job gains were concentrated in professional & business services (+36k) and health care & social assistance (+46.6k). Leisure & hospitality shed 61k last month, following a large jump the month prior. Meanwhile, government added 8k new positions.
In the household survey, the labor force plummeted by 720k, larger than the still hefty decline in civilian employment (-507k). As a result, the unemployment rate fell 11 basis points to a twelve-month low of 4.2%.
Average hourly earnings rose 0.3% month-on-month (m/m), pushing the year-ago measure to 3.5% (from 3.4% the month prior).
Key Implications
Payrolls moderated in June, following a string of exceptionally strong gains in each of the prior three months. The pullback hardly came as a surprise, especially given the large gains in leisure & hospitality and local government the month prior. That said, job growth is still considerably stronger than a year ago, and is also running slightly above the estimated breakeven rate, which helped to push the unemployment rate to a twelve-month low of 4.2%.
While the labor market has clearly turned a corner, this morning’s weaker headline print combined with the downward revisions suggests it’s stopping short of a full-blown reacceleration. Market odds for a July hike were completely pushed back following the release (a hike was 30% priced ahead of payrolls), with all eyes now turning to the June CPI (scheduled for July 14th). While a hotter reading could swing odds back in favor of a summer hike, we still think the bar for policy tightening is high. Today’s policy rate remains somewhat in restrictive territory and provided inflation cools as expected in H2-2026, it will lead to a natural tightening in the real fed funds rate.
