U.S. Nonfarm Payrolls Rose 57,000 in June, Lagging Expectations

U.S. nonfarm payrolls increased by 57,000 in June, a figure that fell short of the consensus expectation of a 113,000 gain. Furthermore, downward revisions to April and May payrolls, totaling 74,000, resulted in a net decline of 17,000 jobs for the month when accounting for these adjustments. This performance suggests a cooling in the labor market following a period of stronger-than-anticipated reports. Despite the June slowdown, the employment picture has shown significant strengthening throughout the first half of 2026, with an average monthly gain of 92,000 jobs, a substantial improvement compared to the 10,000 average monthly increase observed in 2025.

Private sector payrolls advanced by 49,000 in June, though prior months saw a downward revision of 50,000. Key sectors contributing to job growth in June included health care & social assistance, which added 47,000 positions, and professional & business services, up by 36,000. Manufacturing employment rose modestly by 3,000, while government payrolls increased by 8,000. The unemployment rate also saw a decrease, falling to 4.2% in June. However, this dip was primarily attributed to a sizable decline in the labor force that outpaced a 507,000 decrease in civilian employment, an alternative measure that includes small-business startups.

Average hourly earnings, a key indicator of wage inflation, increased by 0.3% in June, pushing the year-over-year growth to 3.5%. Aggregate hours worked also saw a modest rise of 0.1% for the month and are up 0.9% over the past year. While the monthly increase in earnings is positive, it likely struggled to keep pace with the recent, albeit potentially temporary, uptick in inflation.

Looking beyond the headline numbers, job gains in June were predominantly driven by the health care & social assistance and professional & business services sectors. Excluding government and the often government policy-influenced health care & education sectors, payrolls actually declined by 20,000 in June. Federal government payrolls, despite a 2,000 increase in June, have seen a significant decline of 323,000 since the beginning of the previous administration. This trend, excluding decennial Census effects, represents the steepest decline in federal payrolls since the post-World War II demobilization.

Despite the softer June figures, the overall trend in initial jobless claims remains low, with a decrease of 1,000 last week to 215,000. Continuing claims, however, saw a slight increase of 2,000, reaching 1.814 million. The expectation remains for continued job gains in the coming months, building on the stronger performance observed in the first half of the year.

Key terms:

1. Nonfarm Payrolls: A measure of the total number of paid employees in the U.S., excluding farm employees, self-employed individuals, private household employees, and unpaid family workers. It is a key indicator of job growth.

2. Unemployment Rate: The percentage of the total labor force that is unemployed but actively seeking employment and willing to work.

3. Average Hourly Earnings: The average amount of money earned per hour by employees, used as an indicator of wage inflation and consumer purchasing power.