• June nonfarm payrolls rose just 57,000, less than half the consensus estimate of 115,000, signaling a significant slowdown in hiring.
  • The unemployment rate edged down to 4.2% from 4.3% in May, while average hourly earnings increased 0.35% month-over-month to $37.64, up 3.52% year-over-year.
  • Prior months were revised higher: May payrolls were bumped up to 129,000 from the initial 118,000, and April was revised to 148,000.

A Sharper Slowdown Than Expected

US employers added far fewer jobs than anticipated in June, with nonfarm payrolls rising by only 57,000, according to data released Friday by the Bureau of Labor Statistics. The print missed the consensus estimate of 115,000 and marks the weakest monthly gain in over a year. The unemployment rate fell to 4.2% from 4.3%, defying expectations for a steady reading.

Average hourly earnings rose 0.35% month-over-month, or $0.13, to $37.64, bringing the annual increase to 3.52%. The average workweek held steady at 34.3 hours, while the labor-force participation rate remained at 61.5%.

"The payrolls number is a clear disappointment," said one economist at a major investment bank, speaking on condition of anonymity because they were not authorized to comment publicly. "But the revisions to prior months and the drop in the unemployment rate complicate the picture."

Revisions Offer Some Comfort

May payrolls were revised higher by 11,000 to 129,000, and April was revised up by 17,000 to 148,000. Combined, the revisions added 28,000 jobs to the previously reported figures. Private-sector payrolls increased by 49,000 in June, while government employment rose by 8,000.

The softer-than-expected headline figure could bolster the case for the Federal Reserve to hold off on further rate hikes or even begin cutting rates later this year. Markets initially rallied on the news, with the yield on the 10-year Treasury note falling 5 basis points to 4.28%.

Implications for Fed Policy

Fed officials have been closely watching labor market data for signs of cooling that would help tame inflation without triggering a sharp rise in unemployment. The June report suggests that the labor market is softening, albeit gradually. The modest wage growth, coupled with the drop in the jobless rate, leaves policymakers with a mixed signal.

"The data point to a labor market that is still tight but losing momentum," said a senior economist at a credit rating agency. "If this trend continues, we could see the Fed pivot to a more accommodative stance by year-end."

However, the upward revisions to prior months indicate that hiring may not have slowed as abruptly as the June headline suggests. Some analysts caution against overreacting to a single month's data.

"We need to see the next few months of data to confirm whether this is the start of a trend or just a blip," the economist added.

Correction: An earlier version of this article misstated the May payrolls revision. May payrolls were revised to 129,000, not 139,000.