Key Points
- US job growth in June surpassed expectations with a payroll increase of 147,000, largely due to a significant rise in state and local government employment, particularly in education.
- Private sector hiring slowed to just 74,000 new jobs, the lowest since October, reflecting concerns over trade policies, tariff hikes, and restrictive monetary policies.
- The unemployment rate dropped to 4.1%, indicating employer reluctance to lay off workers, while the labor force participation rate also declined.
- Treasury yields and the S&P 500 rose as the report reduced pressure on the Federal Reserve to cut interest rates immediately, with Fed Chair Jerome Powell emphasizing a cautious approach.
- The foreign-born labor force declined for the third consecutive month, influenced by the Trump administration’s immigration policies, potentially impacting labor market dynamics.
Summary
The US labor market in June showed unexpected strength with a payroll increase of 147,000, driven by a surge in state and local government jobs, especially in education, according to a Bureau of Labor Statistics report. However, private sector hiring slowed significantly to 74,000, the lowest since October, amid concerns over President Trump’s trade policies and tariff hikes. The unemployment rate fell to 4.1%, suggesting employers are hesitant to cut jobs, though labor force participation also dropped. Treasury yields and the S&P 500 rose as the data eased pressure on the Federal Reserve to lower interest rates immediately, with Fed Chair Jerome Powell advocating patience until tariff impacts on inflation are clearer. Meanwhile, the foreign-born labor force shrank for the third straight month, influenced by immigration policies, raising concerns about labor supply. Other indicators, like recurring jobless claims and consumer confidence, point to a cooling market, while wage growth slowed and the workweek shortened. Demographic disparities were evident, with Black unemployment rising to 6.8%, the highest since early 2022. Economists suggest the Fed will maintain a cautious stance on rate cuts, awaiting further inflation data.