Steady but not strong: US job growth slowed in June

By Alicia Wallace, CNN

(CNN) — US job growth settled down after a spring surge, as employers added a lower-than-expected 57,000 positions last month, according to Bureau of Labor Statistics data released Thursday.

June’s tally is a marked cooldown from solid gains previously reported for the three months prior. Monthly totals for April and May were revised down by a combined 74,000 jobs, to 148,000 and 129,000, respectively. The picture that emerges is one of a labor market that’s decidedly stronger than its paltry state in 2025 — but one that’s been steadily slowing since March.

Thursday’s data also showed that the unemployment rate dropped to 4.2% from 4.3% as more people left the labor force.

“May’s larger gain briefly suggested the tide might be turning; June makes clear it was the exception, not the new rule,” Laura Ullrich, director of economics at Indeed Hiring Lab, wrote in commentary on Thursday. “On its face, this is a modest but fine report. The trouble is what ‘fine’ has come to mean: June’s gain isn’t evidence of a strong current drawing people in.”

The labor market has been contending with a range of headwinds, including an aging demographic, the rapid adoption of AI, and a recent spike in oil prices from the war in the Middle East.

Labor participation drops off

The US labor market hasn’t yet dislodged itself from the “low-hire, low-fire” sludge that has left few opportunities for those who want them.

Not only were employment gains softer in June, but the unemployment rate dropped as fewer people were in the labor market. Labor force participation dropped to a five-year low of 61.5% last month, falling from 61.8% in May.

“That decline in participation had been concentrated among older workers, perhaps because big stock market gains were prompting a wave of early retirements,” Pantheon Macro economists Samuel Tombs and Oliver Allen wrote in a note Thursday. “But prime-age participation fell sharply last month too.”

At the same time, Thursday’s report showed a decline in people working part-time, both for economic and non-economic reasons.

“It could be that some of them are moving into full-time positions or that their household finances are on steady footing, so they don’t need that additional job,” Elizabeth Renter, senior economist at NerdWallet, told CNN in an interview. “It could also mean that they’re opting out.”

Economists, by consensus, had expected a total of 100,000 jobs added in June and a jobless rate remaining at 4.3% for the fourth consecutive month. However, heading into Thursday, the estimates varied widely — from 35,000 to just shy of 200,000 — as economists weighed the potential effects from ongoing high uncertainty, a volatile war in Iran and rising inflation, as well as World Cup-related hiring boosts.

Leisure losses, healthcare gains

Some economists projected that the World Cup could lift leisure and hospitality jobs by about 40,000 in June, while others said that hiring largely played out in May.

Thursday’s report showed that leisure and hospitality businesses shed 61,000 jobs last month, a reflection of weaker-than-usual seasonal hiring, the BLS noted in the report. The decline came on the heels of a 40,000-job gain in May.

That sector is closely watched as a gauge for consumer health, since it can be tied to discretionary spending, but those expenditures haven’t seen a dramatic drop-off, Renter said.

“Looking at the strong gain last month and then the decline this month, I do wonder if there’s a little bit of a seasonal adjustment issue happening here,” Renter said, noting the statistical practice aimed at smoothing out time-of-year patterns to better highlight underlying trends.

June’s job gains were driven (once again) by healthcare, an industry buoyed by an increasingly aging US population. Healthcare and social assistance added 46,600 jobs last month.

Professional and business services jobs increased by 36,000 last month, while industries such as construction (+11,000 jobs) and manufacturing (+3,000 jobs) ticked up. In addition to leisure and hospitality, jobs were shed in industries such as information (down 9,000 jobs) and retail trade (down 7,500 jobs).

Still, more industries added jobs than lost them, and employment growth is running at a significantly faster tick than last year.

“The acceleration in employment gains in the first half of this year, averaging 92,000 per month versus the paltry average of just 10,000 per month last year, both reflect and support strong economic activity in the US, particularly providing underpinning for continued solid consumer spending,” Kathy Bostjancic, Nationwide’s chief economist, wrote in a note Thursday.

Stability… for now

The consumer, however, is still contending with a highly unpredictable economic climate and higher-than-normal inflation that has added to cost-of-living pressures.

Workers’ annual pay gains, which registered at 3.5% in June, are being entirely eaten away — and then some — by inflation, which rose at a 4.2% clip in May.

“It’s not like you go into work and your boss is like, ‘Hey, I saw grocery prices were up; here’s a raise,’” NerdWallet’s Renter said. “Affordability is going to be the main concern in the back half of the year.”

Falling gas prices are expected to take some of the bite out of inflation in the coming months; however, the pervasive effect of high oil prices combined with stubbornly high underlying price hikes could keep costs elevated.

For the Federal Reserve, the cooler jobs report could ease concerns for potential rate hikes, noted Gus Faucher, chief economist at The PNC Financial Services Group.

However, with new central bank leadership at the helm — Kevin Warsh, hand-picked by President Donald Trump and aligned with his wishes for lower interest rates — it could swing in the other direction, said Phillip Braun, clinical professor of finance at Northwestern University’s Kellogg School of Management.

“It’s quite possible, he’ll use this as an excuse to lower rates, despite high inflation,” Braun told CNN. “That’s both good and bad.”

As for the labor market, the lower-than-expected job gains in June aren’t necessarily a reason to sound the alarm, Renter said, noting it remains fairly stable – particularly in the face of continued economic uncertainty and structural pressures (aging population, lower immigration) on labor supply.

Still, that stability could be easily shaken, she added.

The conflict in the Middle East “seems to be heading toward a resolution, which would mean greater confidence for employers to make predictions about where their business is headed and to make hires,” she said. “So, I think what could really derail things would be the unseen economic shock — and we haven’t really had a shortage of those over the past six years.”

The-CNN-Wire
™ & © 2026 Cable News Network, Inc., a Warner Bros. Discovery Company. All rights reserved.