Employers added 57,000 jobs in June, far below forecasts as hiring slowed

U.S. employers added 57,000 jobs in June, far below analysts’ forecasts and signaling that hiring may be losing momentum. 

By the numbers

Economists polled by FactSet had predicted the economy would add 100,000 jobs last month.

The unemployment rate was 4.2% in June, down from 4.3% in May.

June’s payroll report marked a slowdown after a string of strong reports from March through May, each of which topped 100,000 jobs. On Thursday, the Labor Department revised down job growth for April and May by a combined 74,000, indicating hiring was weaker than previously reported.

The professional and business services industry saw the largest gains in June, adding 36,000 jobs. 

Healthcare also continued to add workers, albeit at a slower pace than in prior months. The sector added 22,000 jobs in June, below the average monthly gain of 38,000 over the prior 12 months, the Labor Department said.

Leisure and hospitality shed 61,000 jobs, surprising some economists who had expected hiring in the sector to strengthen because of the World Cup.

Capital Economics said the main culprit behind the lackluster job report was a 55,000 decline in accommodation and food services employment — part of the overall leisure and hospitality sector — a reversal from May that dragged down June’s job growth.

“This was particularly notable given the backdrop of the FIFA World Cup and July 4th celebrations,” Bradley Saunders, North America economist, said in a research note.

What experts are saying

Despite the weaker-than-expected hiring, analysts noted that the labor market remains resilient, said Jerry Tempelman, vice president of economic and fixed income research at Mutual of America Capital Management.

“Geopolitical and inflationary headwinds have had only a minimal effect on slowing or preventing hiring to this point, and payroll growth has already surpassed last year’s pace,” he said in an email.

Still, economists said the report could hint at underlying issues in the labor market. The hiring rate has remained depressed in recent months, weighing on consumers’ confidence about finding a new job.

What does this mean for Fed rate cuts?

Thursday’s weaker-than-expected jobs report may give the Federal Reserve some breathing room in dealing with inflation, which has jumped to its highest levels in more than three years. Because of the inflation flare-up, the Federal Reserve last month signaled it is open to interest rate hikes later this year.

But with signs of a weaker labor market, the Fed may be able to hold off on hiking rates, economists said on Thursday. Under the Fed’s dual mandate, the central bank must ensure that inflation and unemployment remain low.

“The market has priced additional tightening from the Fed this year, but that looks increasingly unwarranted by the data,” Stephen Coltman, head of macro at 21shares, a investing platform for cryptocurrency exchange-traded products, said in an email.