The US unemployment rate fell to 4.2% in June from 4.3% in May, even as employers added fewer jobs than expected. According to the US Bureau of Labor Statistics (BLS), nonfarm payrolls increased by 57,000 jobs in June, well below the 110,000 jobs economists had expected in a Reuters poll. Payroll growth was also sharply lower than the revised 129,000 jobs added in May. The May figure was revised down from 172,000, but April payroll growth was lowered from 179,000 to 148,000, bringing total revisions for the two months to 74,000 fewer jobs than previously reported.
Unemployment rate drops
The unemployment rate declined to 4.2% in June, while the number of unemployed people remained largely unchanged at 7.1 million. The unemployment rate had stood at 4.3% in May.
As per BLS data, the labour force participation rate fell by 0.3 percentage point to 61.5%, while the employment-population ratio slipped 0.2 percentage point to 59%.
According to Reuters, economists said the lower unemployment rate suggests the labour market remains resilient despite slower hiring. They noted that lower immigration has reduced growth in the labour force, meaning the economy now needs to create only around 0 to 50,000 jobs a month to keep the unemployment rate stable.
Hiring slows but remains above break-even level
June’s increase of 57,000 jobs was the weakest gain in several months but remained above the estimated break-even level needed to match growth in the working-age population.
Reuters reported that the moderation follows three months of relatively stronger hiring and may not indicate a major deterioration in labour market conditions. Companies have continued to avoid large-scale layoffs despite uncertainty from tariffs earlier this year and geopolitical tensions in the Middle East. The report was released a day earlier than usual because of the US Independence Day holiday weekend marking the country’s 250th anniversary.
Healthcare, business services add jobs while hospitality declines
Professional and business services added 36,000 jobs in June and have gained 172,000 jobs since reaching a recent low in October 2025. Social assistance employment increased by 25,000, including 17,000 jobs in individual and family services.
Healthcare added 22,000 jobs, including 9,000 positions in hospitals. However, the sector’s growth was slower than its average monthly gain of 38,000 jobs over the past year.
Leisure and hospitality lost 61,000 jobs, showing weaker-than-usual seasonal hiring. Employment in the sector has shown little overall growth so far in 2026. Most other major industries, including construction, manufacturing, retail, transportation, financial activities and government, saw little change in employment.
Wage growth remains steady
Average hourly earnings for all private-sector employees rose by 13 cents, or 0.3%, to $37.64 in June. Compared with a year ago, wages were up 3.5%.For production and nonsupervisory workers, hourly earnings increased by 7 cents, or 0.2%, to$32.38. The average workweek remained unchanged at 34.3 hours. Manufacturing hours edged down to 40.3 hours, while overtime increased slightly to 3.2 hours.
Fed outlook remains in focus
Before the jobs report, financial markets were pricing in a 50.7% chance that the US Federal Reserve would raise interest rates at its September 15-16 policy meeting, according to CME Group’s FedWatch tool. The Fed kept its benchmark interest rate in the 3.50%-3.75% range at its last meeting but indicated that policymakers still expect further rate increases this year.
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