On July 3, the U.S. Department of Labor released data showing that the U.S. economy added 147,000 nonfarm jobs in June, exceeding the expected 110,000. The unemployment rate dropped from 4.2% to 4.1%, contrary to market expectations, which had anticipated the rate would rise to 4.3%. Additionally, the latest data revised the April and May job additions upward by 16,000.
Amid ongoing discussions about the Federal Reserve potentially lowering interest rates in July, and President Donald Trump continuously pressuring Federal Reserve Chairman Jerome Powell for rate cuts, the U.S. labor market has not shown the significant cooling that many had expected. Instead, it remains moderately strong, complicating the Fed’s prospects for rate cuts in the second half of the year.
The unexpectedly strong employment data led to a rise in U.S. stock futures after the report’s release. According to the CME Group’s FedWatch tool, the market currently sees a 7% chance of a rate cut in July, and a 70% chance in September.
According to this nonfarm payroll report, the average hourly wage in June rose by 0.2% month-on-month and increased 3.7% year-on-year, continuing to show a decline in wage inflation in the U.S.
Government jobs were a significant driver of the new employment, with 73,000 new positions added, especially in state and local government education and related roles. Meanwhile, federal government job cuts continued, with 7,000 workers laid off in the month. The U.S. healthcare sector, which has performed strongly in recent years, added 39,000 jobs.
However, the previous day’s ADP employment report showed an unexpected large drop of 33,000 private-sector jobs in June, marking the first decline since March 2023. Employment in the service industry experienced the biggest drop since the pandemic, heightening concerns about a faster slowdown in the U.S. labor market.
A report released on July 2 by the Brookings Institution and the American Enterprise Institute (AEI) forecast that the net number of immigrants to the U.S. could fall to zero or negative this year. As a result, if the U.S. economy adds only 10,000 to 40,000 jobs per month in the second half of the year, the unemployment rate is expected to remain stable.