U.S. hiring unexpectedly picked up in June as employers added 147,000 jobs despite President Donald Trump's wide-ranging import tariffs, federal layoffs and immigration constraints.
But state and local government hiring sharply boosted the gains. The private sector added just 74,000 jobs, fewest since two Southeast hurricanes dampened payroll growth in October and possibly auguring a broader slowdown. Average weekly hours clocked by private employees also ticked down to 34.2, a five-month low that reflects softer labor demand.
The unemployment rate fell from 4.2% to 4.1%, the Labor Department said Friday.
Ahead of the report, economists surveyed by Bloomberg had estimated 110,000 jobs were added in June.
"Many companies remain in a holding pattern and are hesitant to hire new workers amid heightened uncertainty about the impact of tariff policies on economic growth," Nationwide Chief Economist Kathy Bostjancic wrote in a note to clients."At the same time, they are not laying off workers in a large way, at least not yet."
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What field is hiring the most right now?
State and local governments led the job gains with 70,000.
Health care, a reliable job engine the past couple of years, again drove the private-sector additions with 39,000. Leisure and hospitality, which includes restaurants and bars. added 20,000, and construction, 15,000.
But job creation continues to center around those few sectors, possibly signaling weaker hiring in coming months. Professional and business services shed 7,000 jobs as did manufacturing, which has been struggling because of the tariffs. Retail added just 2,400 positions.
The federal government cut 7,000 jobss amid the Trump administration’s widespread layoffs and has slashed 69,000 since January.
How much are wages increasing?
Average hourly earnings rose 8 cents to $36.30, nudging the yearly from 3.9% to 3.7%.
Wage growth has been slowing after soaring as a result of pandemic-related worker shortages. It’s broadly aligned with the Federal Reserve’s 2% inflation goal, Oxford Economics has said.
How long until the Fed lowers interest rates?
The overall solid job gains give the Fed little reason to reduce its key rate at a late July meeting despite persistent pressure from Trump.
Since cutting interest rates by a percentage point late last year, the Fed has paused as it waits to assess the effects of Trump’s tariffs on inflation and the economy.
The Fed raises rates or keeps them higher for longer to battle inflation. It lowers rates to head off – or dig the economy out of – recession.
The report"was strong enough to allow the Federal Reserve to keep policy on hold as it monitors the impact of tariffs on inflation,” economist Nancy Vanden Houten of Oxford Economics wrote to clients.
At the same time, the weakness in private-sector hiring"supports our view that the Fed will cut" rates three times by year's end"to bolster a slowing economy," Bostjancic said.
Why is the US labor force participation rate falling?
The share of Americans working or looking for jobs fell from 62.4% to 62.3%, lowest since December 2022 and a sign that Trump’s tougher immigration enforcement is constraining the labor supply.
The 130,000 decline in the labor force helped push down the unemployment rate. The drop suggests that “ICE raids may be keeping immigrants away from work,” economist Bradley Saunders of Capital Economics wrote in a note to clients.
Labor force participation is also has been nudged lower by big waves of retiring baby boomers.
Is the job market growing or shrinking?
Average monthly job growth has slowed from a sturdy 168,000 in 2024 to about 125,000 this year. Employers frustrated by labor shortages during the pandemic have been reluctant to lay off lots of workers, limiting the drop-off.
How do tariffs affect employment?
But hiring has fallen below pre-COVID-19 levels. A post-pandemic burst of catch-up hiring has faded and uncertainty about tariffs has led many businesses to wait for the effects of the duties on inflation and consumer spending before adding more staffers.
Trump's 90-day pause on the high-double-digit duties he slapped on dozens of countries is set to expire July 9. In May, the U.S. agreed to slash levies on Chinese imports from 145% to a still-elevated 30%.
And a base 10% tariff remains in effect on most imports, along with a 50% tax on steel and aluminum shipments and a 25% levy on imported cars and many goods from Canada and Mexico.
Other administration policies are also starting to weigh on job growth.
How many federal workers have lost their jobs in 2025?
Goldman Sachs estimated the federal government lost 15,000 jobs last month, though Oxford Economic figured the losses were offset by state and local government gains.
All told, more than 260,000 federal workers have been fired, taken buyouts or retired early this year. The monthly jobs reports have tallied just 59,000 losses so far because many employees are on administrative leave pending court challenges, according to Capital Economics.
How will Trump's immigration policies affect the economy?
Besides cracking down on Southern border crossings, the administration has canceled or declined to renew work permits for hundreds of thousands of migrants, EY-Parthenon estimates.
In May, federal officials ended so-called Temporary Protected Status for 350,000 Venezuelan migrants, Goldman Sachs said in research note. Although the move is being challenged in court, Goldman estimates many employers became reluctant to employ the immigrants or placed them on leave, reducing June job growth by about 25,000.
At the same time, to reduce the chances of being deported, fewer immigrants who lack permanent legal status are searching for work, Morgan Stanley said.
What was the ADP report?
ADP, a payroll processor, estimated Wednesday the private sector shed 33,000 jobs in June, the first job losses it has reported in more than two years.
“We expect the unemployment rate to edge higher in the second-half of 2025 as the labor market softens in response to slower growth, with the full force of tariffs working through the economy,” Vanden Houten said.
Barclays expects average monthly job gains to slow to about 75,000 by the fourth quarter.
But economists say the hiring pullback will likely be roughly matched by a more slowly growing labor supply due to the immigration crackdown, keeping the unemployment rate from rising sharply.
Contributing: Reuters
This story has been updated with new information.
