WASHINGTON — U.S. job growth slowed sharply in June as employers added far fewer workers than economists had expected, while the unemployment rate edged lower because hundreds of thousands of people left the labor force, according to Labor Department data that pointed to a cooling labor market.
The Labor Department's Bureau of Labor Statistics said nonfarm payrolls increased by 57,000 jobs in June after a downwardly revised gain of 129,000 in May. Economists had expected payroll growth of about 110,000 jobs. Employment gains for April and May were revised down by a combined 74,000 positions, indicating weaker hiring momentum than previously reported.
The unemployment rate fell to 4.2% from 4.3% in May. However, the decline coincided with a drop of about 720,000 people from the labor force, pushing the labor force participation rate down to 61.5%, its lowest level in more than five years, suggesting the lower jobless rate reflected fewer people seeking work rather than a surge in hiring.
Hiring remained uneven across industries. Professional and business services, healthcare and social assistance posted job gains, while leisure and hospitality recorded the largest decline, shedding about 61,000 positions. Manufacturing employment changed little during the month.
Average hourly earnings rose 0.3% from May and were up 3.5% from a year earlier, indicating wage growth remained moderate even as inflation continued to outpace earnings growth.
Economists said the report suggested employers remained cautious about expanding payrolls amid elevated inflation and broader economic uncertainty. While layoffs have generally stayed low, weaker hiring and falling labor force participation have raised concerns that labor market conditions are softening more noticeably than earlier in the year.
Financial markets interpreted the weaker employment report as reducing pressure on the Federal Reserve to tighten monetary policy further in the near term. Treasury yields fell after the data, while investors scaled back expectations for additional interest-rate increases in the coming months.
The June employment report will be closely watched alongside upcoming inflation and consumer spending data as Federal Reserve officials assess whether slowing hiring is sufficient to ease inflationary pressures while maintaining overall economic growth.
