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Job growth proved better than expected in June, boosted by government hiring, as the labor market showed surprising resilience and likely took a July interest rate cut off the table. Nonfarm payrolls increased a seasonally adjusted 147,000 for the month, higher than the estimate for 110,000 and just above the upwardly revised 144,000 in May, the Bureau of Labor Statistics reported Thursday. April's tally also saw a small upward revision, now at 158,000 following an 11,000 increase.
The unemployment rate fell to 4.1%, the lowest since February and against a forecast for a slight increase to 4.3%. A more encompassing rate that includes discouraged workers and those holding part-time positions for economic reasons edged down to 7.7%, the lowest since January. Though the jobless rates fell, it was due largely to a decrease in those working or looking for jobs. The labor force participation rate dropped to 62.3%, its lowest level since late 2022, owing to an increase of 329,000 of those not counted in the labor force. The household survey, which is used to calculate the unemployment rate, showed a smaller employment gain of just 93,000. The ranks of those who had not looked for a job in the past four weeks swelled by 234,000 to 1.8 million. Stocks rose following the report while Treasury yields increased sharply in a trading session that will end early ahead of the Independence Day holiday Friday in the U.S. The July gain was almost exactly in line with the year-to-date average of 146,000."The solid June jobs report confirms that the labor market remains resolute and slams the door shut on a July rate cut," said Jeff Schulze, head of economic and market strategy at ClearBridge Investments."Today's good news should be treated as such by the markets, with equities rising despite the accompanying pickup in interest rates."
Along with the solid payroll gains and fall in the unemployment rate, average hourly earnings increased 0.2% for the month and 3.7% from a year ago, indicating little upward pressure on wage-related inflation. The average work week moved slightly lower to 34.2 hours. Government employment posted a large gain, leading all categories with an increase of 73,000 due to solid boosts in state and local hiring, particularly in education-related jobs, which rose by 40,000. Federal government, which is still feeling the impact of cuts from Elon Musk's so-called Department of Government Efficiency, lost 7,000. In addition, health care again was strong, adding roughly 39,000, while social assistance contributed about 19,000. Construction saw an increase of 15,000, and manufacturing lost 7,000. Most other sectors showed little change.
