Hiring Unexpectedly Rose in June

The U.S. labor market delivered a surprise last month: Payrolls rose by 147,000 jobs, more than economists were expecting, according to the latest employment report from the U.S. Bureau of Labor Statistics (BLS).

The July 3 report surprised economists who had predicted a slowdown in hiring amid uncertainty over trade policy and stubbornly elevated interest rates. Revisions to previous months showed that hiring was even stronger in April and May: A combined 16,000 jobs were added in those two months.

“While signs of deceleration persist, today’s report highlights a labor market that is proving more resilient than anticipated,” said Becky Frankiewicz, president and chief strategy officer at ManpowerGroup.

“The June jobs report shows that the job market continues to shrug off headwinds from tariffs, immigration and federal workforce cuts,” said Glassdoor Lead Economist Daniel Zhao.

The U.S. labor market “continues to largely stand tall and sturdy, even as headwinds mount,” agreed Cory Stahle, an economist at the Indeed Hiring Lab. “The headline job gains and surprising dip in unemployment are undoubtedly good news, but for job seekers outside of health care, local government, and public education, the gains will likely ring hollow.

“Employment growth outside of those marquee industries has been anemic at best, and the duration of unemployment for the typical unemployed worker seeking a job continues to creep up,” Stahle said. “There are real weaknesses in the market — including concentrated job gains, slowing wage growth, and falling participation —  that have persisted for months, and there are scant signs of those concerns fading anytime soon.”

Digging below the surface, the BLS report shows that only 74,000 private-sector jobs were created in June, with job growth heavily concentrated in a handful of sectors including state and local government.

“The underlying story of a cooling labor market remains the case in this report, despite the strong headline number,” said Andrew Flowers, chief economist at Appcast. “The wonky adjustments for local government teachers are likely inflating job growth beyond its true level. That said, the bottom is not falling out, and the feared expectations of tariff-related job losses have not appeared.”

Inflation so far has been lower than some economists feared in the wake of tariff announcements, making it easier for the Federal Reserve to lower interest rates this year, which would likely boost employment.

Industry Breakdown

Health care hiring remained strong in June, adding 39,000 jobs. Leisure and hospitality employers also continued to add to job creation, with 20,000 jobs gained.

“Hiring in health care continues to be a standout, with month-over-month growth,” said Geno Cutolo, head of Adecco North America. “We’re also seeing many employers ramp up their workforce planning now to ensure they’re well-positioned for the year-end holiday season and the surge in seasonal demand that comes with it.”

Construction saw an increase of 15,000 jobs, but manufacturing lost 7,000 jobs, falling for the second straight month. It is likely that manufacturers are holding off on hiring because of uncertainty over tariffs.

“Higher prices from tariffs impact manufacturers immediately, while it takes longer for American firms to relocate supply chains to the U.S.,” Zhao explained.

“The concentration of job growth in a few key industries such as health care, restaurants, and government continues to be worth watching,” Flowers said.

Government employment posted the leading gain in June, with an increase of 73,000 jobs due to solid boosts in state and local hiring, particularly in education-related jobs, which rose by 40,000 on the state level and and 23,000 on the local level.

The federal government lost 7,000 jobs, reflecting the impact of cuts from the recently created Department of Government Efficiency, or DOGE.

“Ironically, even as the Trump administration cuts the federal workforce, state and local government jobs growth drove the higher job gains in June,” Zhao said.

Unemployment Rate Dips

The unemployment rate fell to 4.1%, the lowest since February and contradicting a forecast for a slight increase to 4.3%. A more encompassing rate that includes discouraged workers and those holding part-time positions for economic reasons edged down to 7.7%, the lowest since January.

“The unemployment rate ticked down, but unemployment duration increased from an average of 21.8 weeks to 23 weeks,” Stahle said. “Still, the rate has been remarkably steady in the last year, bouncing in a narrow range of 4.0% to 4.2%.”

Though the jobless rates fell, it was due largely to a decrease in those working or looking for jobs, experts said.

The labor force participation rate dropped to 62.3%, its lowest level since late 2022. The ranks of those who had not looked for a job in the past four weeks swelled by 234,000 to 1.8 million.

“The share of workers between the ages of 25 and 54 engaged in the labor market, also called the prime-age labor force participation rate, ticked up slightly to 83.5% in June but remains below its September 2024 peak of 83.8%,” Stahle said.

Frankiewicz said that June marked the weakest hiring month of the year, with new postings down 7% month over month and 2% year over year, according to ManpowerGroup data. Open job postings have fallen 8% since May.

Wages

Along with the solid job gains and fall in the unemployment rate, average hourly earnings increased 0.2% for the month and 3.7% from a year ago, indicating little upward pressure on wage-related inflation. “Wage growth held steady at 3.9% year-over-year for frontline workers,” Flowers said.