U.S. payrolls grew by just 57,000 in June, less than half the 110,000 consensus, as leisure and hospitality shed 61,000 jobs — the largest monthly decline in that sector since December 2020.
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US payrolls miss by wide margin as 57,000 jobs added in June
U.S. employers added 57,000 jobs in June, well below the 110,000 consensus, while the unemployment rate fell to 4.2% as workers exited the labor force — a mixed report that buys the Fed time to hold rates steady.
Kevin Hassett, director of the National Economic Council, called the data "100% consistent with what we view as a very strong economy" in a CNBC interview Thursday.
The headline miss was driven by a 61,000 drop in leisure and hospitality employment, the largest monthly decline since December 2020, which ran counter to expectations of a World Cup boost. May's payrolls gain was revised down to 129,000 from the initially reported 172,000. Average hourly earnings rose 3.5% from a year earlier, matching forecasts. Markets interpreted the data as reducing the urgency for tighter policy: S&P 500 futures rose 0.37%, the 10-year Treasury yield fell 1.4 basis points to 4.461%, and the dollar index slid 0.78% to 100.61.
The report arrives as Fed Chair Kevin Warsh faces a critical test of his communication strategy at the ECB's Sintra forum. Warsh has eliminated traditional forward guidance, making each data release more consequential for rate expectations. CME FedWatch data shows markets pricing a 64% probability of a rate hike by September, though Thursday's softer print could push that timeline further out. "This report alone is not enough to take a rate hike off the table, but it may be enough to push the timing out," said Shawn Snyder, economic strategist at Potomac Fund Management.
The June data follows a pattern that has emerged in each of the past two years: job growth averaging about 124,000 per month between March and May before slowing sharply in June to an average of just 34,000, Snyder noted. That pattern was one reason the Fed delivered a 50-basis-point insurance cut in September 2024. The ADP private payrolls report earlier this week showed 98,000 jobs added in June, below the 113,000 consensus and down from 122,000 in May, providing an early signal of the slowdown.
Peter Cardillo, chief market economist at Spartan Capital Securities, described the report as "Goldilocks" — cool enough to keep the Fed on hold but not weak enough to signal recession. "It reinforces the notion that the Fed has to fight inflation, but not an overly heating jobs market," he said. "It buys time to hold off on raising interest rates at least in July."
The labor market's softening comes as inflation remains the Fed's primary concern. Cleveland Fed President Beth Hammack said this week that inflation is "still too high" and that rate hikes "may need to be considered," though Thursday's payrolls data may temper that urgency. Goldman Sachs Asset Management's Kay Haigh said ongoing labor market stability likely leaves the Fed focusing on upcoming inflation data to determine its appetite for tightening.
For the White House, the data supports the administration's narrative of a resilient economy. Hassett's characterization of the report as consistent with a "very strong economy" contrasts with the headline miss, underscoring the political stakes around employment data in an election year. The leisure and hospitality decline of 61,000 jobs — the worst since the pandemic era — will draw particular scrutiny given the sector's role as a bellwether for consumer health.
This article is for informational purposes only and does not constitute investment advice.
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