Washington — After a run of impressive hiring numbers, the pace of U.S. job growth is expected to have slowed in June, though economists say the labor market remains on solid footing. The unemployment rate is forecast to stay at 4.3% for the fourth consecutive month.
The anticipated pullback comes on the heels of three straight months of payroll gains that exceeded expectations. Economists said the closely watched Labor Department employment report, released Thursday — a day early due to Friday’s public holiday marking the country’s 250th anniversary of independence on Saturday — keeps a possible September interest rate increase by the Federal Reserve in play, given rising inflation tied to the U.S.-led conflict with Iran.
“A few months ago, I was actually worried because we had lost jobs in five months,” said Dan North, senior economist at Allianz Trade Americas. “We’ve seen the labor market firm up over the past three months, and I don’t see any particular imbalance. We’re in this very tiresome phrase of ‘no hire, no fire’ labor market.”
A Reuters survey of economists projected nonfarm payrolls grew by 110,000 jobs in June, down from 172,000 in May. Estimates ranged widely, from a low of 25,000 to a high of 200,000. Economists noted the economy needs to add somewhere between zero and 50,000 jobs monthly to keep pace with growth in the working-age population — a threshold that has dropped due to an immigration crackdown that has shrunk the labor force and helped hold the unemployment rate steady.
Payrolls climbed 214,000 in March and 179,000 in April, pushing the three-month average through May to 188,000 — a sharp contrast to the 63,000 average seen during the same stretch in 2025. Economists had difficulty pinpointing the exact cause of the improvement, but most agreed that an unusually low rate of layoffs played a major role. Companies have been reluctant to cut workers after facing significant difficulty filling positions in the wake of the COVID pandemic, even as they navigate uncertainty from tariffs and the ongoing Middle East conflict.
Still, the strength in payroll numbers hasn’t shown up in other labor market measurements. A Conference Board survey released Tuesday found that the share of consumers who consider jobs “hard to get” was near a five-and-a-half-year high in June. Small business hiring plans have also remained subdued.
“The rather confusing thing is that the jobs numbers have been pretty strong, while all the other labor market indicators haven’t been anywhere nearly as robust,” said James Knightley, chief international economist at ING. “There is a little bit of caution that it could come to an end at any point; it could be that the relative softness in the business surveys starts to materialize in the payrolls numbers.”
Some economists, however, believe the risks facing the labor market have lessened following a ceasefire agreement between the U.S. and Iran, which has pushed oil prices back to pre-war levels. They expect the recent broadening of job growth — which has expanded beyond the healthcare sector — to continue through the rest of the year.
“The downside labor risks that prompted last year’s rate cuts have not materialized,” said Shruti Mishra, an economist at Bank of America Securities. “Combined with sticky inflation, that strengthens the case for reversing those cuts.”
Financial markets placed roughly a 50.7% probability on the Fed raising interest rates at its September 15-16 meeting, according to CME Group’s FedWatch tool. Last month, the central bank held its benchmark overnight rate in the 3.50%-3.75% range, though updated projections from policymakers indicated they expect to raise borrowing costs before year’s end.
The expected dip in June hiring was partly attributed to payback after certain sectors — including local government — posted unusually large gains the month before. Economists were also divided on how much the FIFA World Cup, co-hosted by the United States, Canada, and Mexico, influenced the numbers. Leisure and hospitality payrolls surged 70,000 in May, with some analysts crediting the tournament.
Economists at Goldman Sachs said historical data suggests the World Cup may have boosted payroll growth by 40,000 in June, particularly in leisure and hospitality, professional and business services, and trade and transportation. Analysts at JPMorgan, meanwhile, were less convinced the World Cup drove May’s leisure and hospitality gains — pointing instead to the early timing of the Memorial Day holiday relative to 2025 — but said World Cup-related hiring could still help offset some of June’s expected pullback in that sector.
On the wage front, average hourly earnings are projected to have risen 3.5% year-over-year in June, up slightly from 3.4% in May — a pace some economists say does not warrant tighter monetary policy from the Fed.
“Wage trends and the unemployment rate will be the two most important signals regarding whether stronger job growth is leading to a retightening in the labor market, putting upward pressure on wages and price inflation,” said Veronica Clark, an economist at Citigroup. “So far, there are limited signs that this is the case.”
