US job growth slowed to 57,000 in June, labor force shrinks by 700,000

The headline numbers

Employers added 57,000 nonfarm jobs in June, well below the roughly 115,000 that economists had forecast. The Bureau of Labor Statistics also revised April and May payrolls down by a combined 74,000, trimming earlier strong tallies to 148,000 in April and 129,000 in May. Three-month average job gains slipped to 111,000, down from 164,000 in May.

Behind the unemployment rate drop

The headline jobless rate edged down to 4.2% from 4.3%, but the decline came for the wrong reasons. Roughly 720,000 people left the labor force in June, pushing the participation rate down 0.3 percentage point to 61.5%. Among prime-age workers (25–54), participation slid 0.6 percentage point, the largest single-month fall outside the pandemic in at least a decade. Household employment fell by 507,000, while the number of people reporting themselves as unemployed dropped by 213,000.

The unemployment rate's decline to 4.2% is a case of good news for the wrong reasons: it was driven by people leaving the labor force, not by more hiring.

Wages and sectoral shifts

Average hourly earnings rose 0.3% in June, the second consecutive monthly acceleration, and 3.5% from a year earlier. Some of that pickup may reflect slower hiring in lower-paying sectors. Professional and business services, social assistance and health care added the most jobs; leisure and hospitality shed positions. Employment in movies and music dropped by 3,600 to 321,700, while broadcast and content providers gained 1,400.

Fed policy in focus

The mixed signal complicates the Federal Reserve’s reading of the labor market. San Francisco Fed President Mary Daly noted before the release that there is a scenario where “growth just doesn’t continue to sustain itself” and that uncertainty argues for holding rates steady. Fed Chair Kevin Warsh, who has emphasized price stability, said last month that the three-to-six-month trend matters more than a single report. Financial markets trimmed bets on a near-term rate hike after the data.

Broader picture

Since President Donald Trump’s return to office, the labor force has shrunk by about 1.3 million, and roughly 1.5 million fewer people were working in June than in January 2025. The report arrives as consumer confidence remains subdued and inflation, though elevated, shows early signs of easing. The June CPI reading due later this month will be the next major input for Fed policymakers.