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.
By sector, the professional and business services industry saw the largest gains in June, adding 36,000 jobs. Healthcare also continued to add workers, though 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 stronger hiring in the industry because of the World Cup and July 4 celebrations.
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.
However, some experts expressed doubts about the numbers.
"There is zero chance leisure and hospitality posts a negative print in the midst of the World Cup," Jamie Cox, Managing Partner for Harris Financial Group, said in an email. "Revisions higher in the next few months are coming."
What experts are saying
Despite weaker-than-expected hiring in June, analysts noted that overall labor market conditions have improved since earlier in the year, with employment continuing to grow at a healthy pace. Employers added an average of roughly 111,000 jobs a month from April to June, compared with about 73,000 jobs a month from January to March.
Jerry Tempelman, vice president of economic and fixed income research at Mutual of America Capital Management, pointed to the labor market's resilience.
"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 underwhelming jobs report could give the Federal Reserve some breathing room in dealing with inflation, which has jumped to its highest levels in more than three years.
Although the Fed signaled last month that it is open to raising interest rates later this year, a stretch of softer job growth could ease inflation by reducing the pressure on employers to raise worker wages, according to economists.
At the same time, solid payroll gains this year and low unemployment could forestall any immediate need for the Fed to lower its benchmark rate to boost hiring.
"From a Federal Reserve point of view, there is not enough job strength to suggest the Fed should hike to slow job growth, but neither is there enough weakness to justify cuts," Chris Low, chief economist at investment firm FHN Financial, said in a report.
Edited by Aimee Picchi
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