Once again, the jobs report outperformed consensus expectations on the back of the usual sectors. Despite all the fuss in the headlines, we continue to see a labor market posting solid numbers but with little to no momentum. The lack of employment growth outside of Healthcare, Hospitality, and Government reflects the steady but slow hiring we see across most industries. Steadiness, a low unemployment rate, and ongoing job gains will keep the Federal Reserve on the sidelines in supporting the labor market. However, for job seekers not in those select industries, momentum remains hard to come by.
1. Nonfarm payrolls increased by +147K in June, above consensus estimates with substantial upward revisions in April (+11K) and May (+5K). Healthcare and Social Assistance, Leisure and Hospitality, and State and Local Government accounted for the vast majority of employment gains in June, as they have since January 2023. The Federal government shed 7K jobs. The lack of robust job growth outside of a few sectors continues to point to a labor market at a standstill.
2. Unemployment ticked down to 4.1% with declines in job loss and reentrants offsetting a rise in job leavers (quits). The number of workers part-time for economic reasons remained relatively unchanged as it did in May, and the household survey indicated that employment declined on average by -88K thus far in 2025. Both the labor force participation rate and the employment-to-population ratio for 25-54 year olds sit at their January levels. The lack of momentum in labor force growth suggests future increases in unemployment are likely to come from job loss (layoffs) rather than workers joining the labor force.
3. Employment at Temp Agencies declined by 3K, however, we have seen stabilization in the employment level in this sector since October 2024.
4. Wage growth (measured by average hourly earnings) rose at an annualized rate of 2.7% (3.5% for private-sector production and nonsupervisory employees), decelerating from 4.8% (3.9% for private-sector production and nonsupervisory employees) from May to June. This deceleration, along with evidence from private sector data, strongly suggests that wage growth has stabilized, and the labor market remains a limited source of inflationary pressure.
The June jobs report showed that the US economy continued to add jobs at a healthy clip, even against the backdrop of tariffs, government spending cuts, and slowing economic growth. But looking at the details, analysts say there’s evidence that the labor market is cooling.
The economy added 147,000 jobs last month, according to data released Thursday by the Bureau of Labor Statistics. That was roughly on par with the 144,000 added in May and far higher than economists forecasts of 115,000 for June. The unemployment rate fell to 4.1% from 4.2% in May.
The bulk of the gains in June came from state government and healthcare, according to the BLS, while the federal government continued to lose jobs.
Signs of a Cooling Labor Market
Despite the healthy headline number in June, analysts say the underlying data was less encouraging. “It could be argued that today’s report is not as positive as the headline suggests, given that nearly half of June’s job additions came from government, which is not necessarily a good indication of economic strength,” says Morningstar Wealth chief multi-asset strategist Dominic Pappalardo. He points to slowing growth in the private sector in June.
“The hiring dynamic in the country has quietly gotten a little bit softer now,” adds Rick Rieder, BlackRock’s chief investment officer of global fixed income, who thinks the spike in state and local government hiring may not be a durable trend. He says that while the data doesn’t point to a concerning downtrend, it does suggest “companies are hiring fewer people these days.”
Economists from Wells Fargo described Thursday’s report as consistent with a cooling labor market. “The breadth of hiring was narrow and the decline in the unemployment rate was partially driven by workers leaving the labor force,” they wrote in a research note.
Selected Payroll Categories
June Jobs Report Key Stats
- Total nonfarm payrolls rose by 147,000 after rising by 144,000 in May.
- The unemployment rate moved little at 4.1% in June from 4.2% in May.
- In June, average hourly wages rose by 8 cents, or 0.2%, to $36.30.
- The average workweek for all employees on private nonfarm payrolls edged down by 0.1 hour to 34.2 hours in June. For manufacturing employees, the average workweek was unchanged at 40.1 hours in June, and overtime was unchanged at 2.9 hours.
When Will the Fed Cut Rates?
Analysts don’t expect the report to alter the Federal Reserve’s monetary policy. “There is nothing to force the Fed off the sidelines at the July meeting,” said BMO Capital Markets chief US economist Scott Anderson in a note to clients.
The Fed has kept rates at their current range of 4.25%-4.50% since last December, and it is widely expected to continue holding steady at its upcoming meeting. Fed officials have been consistent in their messaging that they are not in a rush to cut while economic data still looks solid, especially since inflation remains above their 2% target as measured by the Personal Consumption Expenditures index.
Federal-Funds Rate Target Expectations for September 17, 2025 Meeting
Pappalardo argues that the strong overall jobs number for June might complicate the Fed’s decision-making. “Today’s release does little to help the Fed alleviate their current conundrum of likely wanting to lower rates amid concerns around slowing economic activity, but being hesitant to do so amid risks of persistent or even increasing inflation,” he says. “A strong employment picture does nothing to alleviate the Fed’s inflation-related concerns and will likely prevent them from cutting rates sooner-than-expected as discussed above.”
Bond futures markets see 67% odds that the first rate cut comes in September, according to the CME FedWatch Tool. That’s up from 55% odds a month ago.
🛑 The June Jobs Report: Weak Under The Surface. Don't Stop At the News Headlines 👇🏾
🔥 Despite a total gain of 147K in June, the private sector added just 74K jobs - a massive DOWNSHIFT from the 137K added in May. More than half (54%) of the topline came from a likely one-time increase in state and local government hiring.
🔥 The civilian labor force shrank to 170,380,000. This is DOWN from 170,510,000 in May - part of the reason the unemployment rate nudged lower.
🔥 Despite the decline in labor supply, private sector wage growth SLOWED to 0.2%, down from 0.4% in May. On a year-over-year basis, wage growth cooled to 3.7% from 3.8% last month. Wages adjusted for inflation are moving LOWER again, and the consumer will feel it.
🔥 Treasury yields moved up on the news. I expect a reversal. While a Fed rate cut in July is off the table, a September rate cut is still very much in play 🏦
📊 Markets closed early today, but not before setting more records.
Market wrap-up for Thursday, July 3rd:
✅ The S&P 500 (+0.83%) *new all-time high*
✅ The Nasdaq (+1.02%) *new all-time high*
✅ The Dow rose 345 points, putting its own record within reach.
The driver? A stronger-than-expected June jobs report:
➡️ 147,000 jobs added (vs. 106,000 forecast)
➡️ Unemployment ticked down to 4.1%
That data likely takes a July Fed rate cut off the table. Attention now turns to September.
Other market movers:
📌 The July 9 tariff deadline is fast approaching
📌 Trump’s tax and spending bill could pass the House as early as tomorrow
🇺🇸 Markets are closed Friday for the Independence Day holiday.
Happy July 4th, and yes, Joey Chestnut is back for the Nathan’s Hot Dog Eating Contest. 🌭