WASHINGTON — The U.S. unemployment rate stood at 4.2% in June as employers sharply slowed hiring, according to the latest Labor Department employment report, underscoring signs of a cooling labor market even as the headline jobless rate remained relatively stable.
The Bureau of Labor Statistics reported that nonfarm payrolls increased by 57,000 jobs in June, well below economists' expectations and down from a revised gain of 129,000 in May. The agency also revised payroll estimates for April and May lower by a combined 74,000 jobs, indicating weaker hiring momentum than previously reported.
The unemployment rate edged down from 4.3% in May to 4.2%, an outcome that economists said reflected a decline in labor force participation rather than stronger hiring. The labor force participation rate fell to 61.5%, its lowest level since 2021, as hundreds of thousands of people left the workforce during the month, according to the Bureau of Labor Statistics.
Employment gains were concentrated in professional and business services, health care, and social assistance, while hiring remained subdued across several other sectors. Average hourly earnings rose 0.3% over the month and 3.5% from a year earlier, suggesting wage growth continued at a moderate pace.
The weaker-than-expected payroll figures prompted investors to reassess the outlook for U.S. monetary policy. Treasury yields initially declined after the report, while financial markets interpreted the slower pace of hiring as reducing immediate pressure on the Federal Reserve to tighten policy further.
Economists said the June data pointed to a labor market that continues to soften after several years of robust employment growth, though they noted that unemployment remained low by historical standards. The combination of slower payroll gains, downward revisions to previous months, and reduced labor force participation suggests employers are becoming more cautious amid broader economic uncertainty.
The employment report is among the Federal Reserve's most closely watched indicators as policymakers assess labor market conditions alongside inflation in determining the path of interest rates. Officials have repeatedly said future policy decisions will depend on incoming economic data.
The Bureau of Labor Statistics is scheduled to release its next monthly employment report in early August, providing an updated assessment of labor market conditions for July.
