US Posts Disappointing Job Growth in June

U.S. employers added 57,000 jobs in June, falling short of expectations and signaling that the labor market has returned to a slower, more cautious phase. While the unemployment rate edged down to 4.2%, the decline was driven in part by a shrinking labor force rather than broad-based hiring, according to the latest employment report from the U.S. Bureau of Labor Statistics.

The report also included significant downward revisions, reducing April and May payroll gains by a combined 74,000 jobs. Even so, the labor market remains in a better position than it was during the second half of 2025, when the economy lost an average of 8,000 jobs per month. During the first six months of 2026, employers added an average of 92,000 jobs monthly, though hiring remains concentrated in a handful of sectors.

“The downward revisions and deceleration in jobs growth reverse some of the optimism in recent months that the job market had been on the verge of accelerating to a new pace,” said Daniel Zhao, chief economist at Glassdoor.

Sam Kuhn, an economist at Appcast, agreed that June marked a noticeable slowdown after several encouraging months. He noted that downward revisions lowered three-month payroll growth to 111,000 jobs, “still a healthy figure, but a step below the recent pace of hiring.”

Economists say the report reflects a labor market that is stable but increasingly stagnant.

Laura Ullrich, director of economics for the Indeed Hiring Lab, described the labor market as “slack, with relatively few workers being pulled into new jobs, and few being pushed out of old ones.” While she called the report “modest but fine,” she argued that “fine” has come to mean a market where “both the inflow and the outflow have gone nearly quiet.”

That environment has different implications depending on a worker’s circumstances, she said. “If you already have a job, slack is reassuring,” because layoffs remain rare. “If you are looking for a job, the same conditions are the whole problem. There are few new openings to pursue, with hiring at levels near where we were 11 years ago, when the labor force was nearly 13 million people fewer than it is today.”

Ullrich cautioned that the current equilibrium depends on layoffs remaining exceptionally low but added that “the tide has sat slack for an unusually long stretch at this point, but it’s worth remembering that it always, eventually, turns.”

The shrinking U.S. labor force remains a growing concern. It declined by 720,000 workers between May and June, likely reflecting continued Baby Boomer retirements and reduced immigration.

In addition, “inflation has ticked back up and is slowing down the momentum that has been building over the past few months,” said Nicole Bachaud, labor economist at ZipRecruiter. “With participation shrinking, wage growth lagging inflation, and job gains concentrated in just one or two sectors, the resilience the labor market has shown over the past year looks increasingly tested.”

Despite the softer hiring numbers, employers continue to invest selectively. “June’s job gains came in below economist projections, pointing to a labor market that is settling into a more measured pace,” said Amy Glaser, senior vice president at Adecco. “Despite the slower rate of hiring this month, the labor market overall remains fundamentally strong,” she said. “We’re still seeing hiring across industries as employers continue to invest in talent.”

Noah Yosif, chief economist at the American Staffing Association, struck a similarly balanced tone, saying, “Steady employment and falling unemployment are driving a full-fledged recovery in labor market momentum. But beneath the headlines, labor market weaknesses persist.”

He noted that job growth remains concentrated in healthcare and construction, while wage gains continue to lag inflation. Yosif also pointed to elevated unemployment among young college graduates as evidence that “the labor market is still unable to accommodate new entrants with the most to lose from a late start to their careers.”

AI-driven investment is also reshaping hiring demand.

“The challenge isn’t a lack of opportunity,” said Ger Doyle, regional president, North America at ManpowerGroup. “It’s that the opportunities driving growth today increasingly require a different mix of skills than they did just a few years ago.”

Doyle noted that there are now slightly more job openings than unemployed workers for the first time since last summer, suggesting hiring demand may be stabilizing. Looking ahead, he said, “the next phase of the labor market will depend on whether investment in AI, digital infrastructure and business transformation creates opportunities across a broader range of industries and occupations.”

Specialty Credential: Talent Acquisition

Industry Breakdown

June’s employment report showed job growth remained concentrated in a handful of industries, underscoring a labor market that continues to expand unevenly.

Professional and business services led all sectors with 36,000 new jobs, while healthcare added 22,000 positions. Government employment rose by 8,000. Manufacturing and construction also posted gains, reflecting continued investment in AI-related infrastructure, while the information sector continued its long-running decline amid AI-driven disruption.

The biggest surprise came from leisure and hospitality, which shed 61,000 jobs despite expectations that the FIFA World Cup would boost hiring. Economists had anticipated increased staffing across hotels, restaurants, and entertainment venues, but the gains have not yet materialized.

Kuhn noted that he had been skeptical that the World Cup would meaningfully boost hiring. “Looking at the unadjusted data, year-over-year employment growth in leisure and hospitality was largely unchanged from prior months, suggesting the tournament had little measurable impact on hiring.”

Zhao reached a similar conclusion, noting that leisure and hospitality is the most obvious industry to benefit from the tournament, yet restaurants, accommodations, and spectator sports venue jobs all posted declines. While temporary help services and local government employment recorded modest gains, Zhao said “any World Cup boost in employment is ultimately expected to be temporary once the event is over.”

Bachaud said professional and business services “has seen a steady rise since the Fall, as more emphasis on professional jobs, including technology-focused positions, has followed the excitement around AI expansion in the workplace.” At the same time, she said slower seasonal hiring in leisure and hospitality was “likely linked to rising inflation weighing on consumer confidence and spending.”

Glaser suggested hiring may have shifted to earlier in the year. “Leisure and hospitality saw a decline in employment in June following several months of stronger hiring, which may reflect that some seasonal hiring occurred earlier in the year in anticipation of summer demand,” she said.

Healthcare remained one of the labor market’s brightest spots. Ullrich said private education and health services showed strong increases yet again, but with most other industries posting little movement, “the picture is one of a labor market in standstill.”

The report also highlighted AI’s growing influence on hiring patterns. Doyle said demand for AI-related skills has nearly doubled over the past year, extending beyond technology roles into engineering, operations, project management, and business transformation as organizations move from AI experimentation to implementation at scale.

Meanwhile, Elise Gould, senior economist at the Economic Policy Institute, noted that longer-term sector trends remain concerning. “Since January 2025, the manufacturing sector has lost 75,000 jobs,” she said, while federal employment has declined by 324,000 positions over the same period, warning that “the vital services federal employees provide cannot be done without these essential workers.”

Resource: Talent Acquisition

Unemployment Dips

The decline in the U.S. unemployment rate was driven in part by fewer people participating in the labor force rather than a broad improvement in hiring.

The labor force participation rate fell to 61.5%, its lowest level since March 2021, while a broader measure of unemployment that includes discouraged workers and those working part time for economic reasons declined to 7.9%.

“Unemployment fell back, but that doesn’t necessarily mean finding a job is getting any easier for many job seekers,” Bachaud said. She noted that long-term unemployment remains elevated, with 27.3% of unemployed workers out of work for six months or longer.

Bachaud also pointed to demographic pressures behind the shrinking labor force. “Outside of the COVID pandemic recovery, labor force participation hasn’t been this low in 50 years, driven by shifting population dynamics,” she said. “Now that Baby Boomers are retiring and exiting the workforce, and net immigration is down, the labor pool is expected to continue shrinking.”

Kuhn highlighted another concerning trend — the sharp drop in the prime-age labor force participation rate. “Excluding the large drop during the peak of the pandemic, this was the single largest decline in the series during the 21st century,” he said. “Most of the decline was concentrated among the 25-34-year-old group, so the shift may just be noise, but it is a large enough drop to warrant further inspection.”

Wages Not Keeping Up

Average hourly earnings rose 3.5% in June from a year earlier, matching expectations but continuing to trail inflation, which reached 4.2% in May. The gap means many workers are still losing purchasing power despite steady wage gains.

“Energy prices may have peaked as the U.S. and Iran negotiate,” Zhao said. However, he noted that “the accumulated run-up in energy prices so far has been enough to drive CPI inflation to 4.2%” and that “annual inflation-adjusted wage growth may be negative for another month.”

The disconnect between wages and inflation is weighing on household finances. Bachaud said “wages have been softening for a while, with wage growth now sitting below inflation growth,” adding that “many households, especially lower- and middle-income ones, may face more financial challenges as wages remain soft.”