CNN
—
The US job market continues to chug along despite heightened uncertainty about the economy and how President Donald Trump’s tariffs could shake out.
The economy added a stronger-than-expected 147,000 jobs in June, and the unemployment rate ticked down to 4.1% from 4.2%, according to Bureau of Labor Statistics data released Thursday.
Last month’s gains, which landed above expectations for 117,500 jobs to be added, marked a slight increase from May’s total, which was revised up slightly (5,000 jobs) to 144,000. April’s job gains were revised higher by 11,000 jobs, for a net gain of 158,000.
Those revisions and Thursday’s data bring the three-month average job growth to 150,000.
However, despite the continuation of fairly solid monthly employment gains, Thursday’s jobs report once again showed several potentially concerning signs, including some fissures that may be spreading under the weight of the Trump administration’s economy-shifting policies.
Notably, job growth is not widespread, indicating that the biggest opportunities are within a select few industries.
The vast majority of the month’s gains were in health care (+58,600 jobs), leisure and hospitality (+20,000 jobs), and state and local government (+80,000 jobs*). [*The sharp increase here is likely “artificial,” economists for Pantheon Economics cautioned. More on that below.]
And when stripping out the public sector gains (the +80,000 was offset slightly by a loss of 7,000 jobs federally), US private sector businesses added 74,000 jobs in June, the smallest monthly gain since October 2024.
“The tariff tax hike, restrictive monetary policy and worries about a further intensification of the trade war are weighing heavily on labor demand,” Samuel Tombs, chief US economist at Pantheon Macroeconomics, wrote in an investor note on Thursday. “Private payrolls excluding healthcare and education rose by just 23,000, well below the 50,000 average pace in the previous 12 months. Fundamentally, then, this is a weak report.”
Tombs noted that the mathematical adjustments made by the BLS to smooth out seasonal fluctuations (think: construction employment surging in the spring and retail ramping up hiring in advance of Christmas) may have made the overall numbers look a little more rosy. Education jobs typically fall in the summertime; however, the decrease was not as sharp this year, which the seasonal adjustment factor relayed as a strong gain.
The labor force participation rate ticked down, while the unemployment rate for Black workers surged by 0.8 percentage points to 6.8%, its highest rate since January 2022.
The household survey, one of two that feed into the monthly jobs report, often can have volatile monthly swings; however, rising unemployment levels for Black workers has in the past served as an indicator of impending economic weakness.
“There has been this thought that when the economy slows, Black workers might feel the effects of that more quickly, because they might be in situations that have less job security,” Daniel Zhao, chief economist at Glassdoor, told CNN in an interview. “But the timescale for that tends to be pretty short, and it is very dependent on which industries are impacted.”
Workers’ wages overall increased at a slower pace than economists expected. Average hourly earnings rose by 8 cents, or 0.2%, to $36.30 last month, bringing the annual rate to 3.7% from 3.9%.
The headline unemployment rate moving down to 4.1% also may be a function of a declining labor force, economists cautioned.
“One gets the sense that the cumulative impact of tighter immigration policy is on the margin beginning to impact the size of the labor force and will impose a ceiling on any prospective increase in the unemployment rate as the economy slows,” Joe Brusuelas, chief economist for RSM US, wrote in a note on Thursday.
Layoff activity remains muted
Stocks were higher Thursday: The Dow rose by 365 points, or 0.8% by mid-morning. The broader S&P 500 rose 0.8% and the tech-heavy Nasdaq gained 0.9%.
Trump has introduced a bevy of sweeping policies that have the potential to impact the economy. However, questions around how those actions will shake out — particularly the size and scope of tariffs — have heightened uncertainty and hampered hiring activity, to some extent.
For several months running, the labor market has been in a state of low churn: Hiring activity is at near 10-year lows and workers aren’t feeling confident enough to quit; however, employers, for the most part, are holding on to the workers they have.
Layoff activity hasn’t accelerated recently, according to a variety of indicators, including weekly jobless claims data.
On Thursday, the latest batch of claims data showed that first-time filings for unemployment insurance — considered a proxy for layoffs — decreased to 233,000 for the week ended June 28 from 237,000 the week before, according to a separate report released by the Department of Labor.
While first-time claims aren’t steadily on the rise, people appear to be having a harder time finding work when they’re unemployed.
Continuing claims, which are filed by people who have received jobless benefits for at least one week, have been butting up against three-and-a-half-year highs. During the week that ended June 21 (continuing claims data runs at a lag), those filings were unchanged at 1.964 million, according to the Labor Department report.
Thursday’s jobs report highlighted a similar trend: Job seekers are staying unemployed for roughly six months, and the share of unemployed workers who have been out of a job for 27 weeks or longer rose to 23.3%, edging closer to a three-year high, BLS data shows.
The Fed could remain on the sidelines
In periods of high uncertainty, economic data becomes all the more important to get a grasp on any indications that a downturn could be in the works.
That’s especially true for the data-dependent Federal Reserve, which anticipated easing its decades-high interest rates this year but has held off out of concern that Trump’s tariffs could stoke inflation and put a squeeze on businesses and consumers.
“There’s nothing in this report that forces the Fed’s hands to cut rates earlier than expected,” Zhao said. “It does look healthy from a top-line view.”
However, there is some concern about how to interpret the number in an environment where the labor force growth is significantly slowing and the extent to which lower immigration flows could be contributing to that, he said.
Ultimately, one of the biggest questions could be around the breakeven employment growth level (amount of jobs needed to keep pace with labor force and population growth).
Estimates for the breakeven level, which pre-pandemic was running about 70,000 to 100,000 jobs per month, sometimes soared north of 200,000 jobs in recent years because of heightened levels of immigration.
At this point, considering demographics, an aging workforce and a slowdown in immigration that started in the mid-point of last year, the breakeven level is likely closer to 100,000 jobs per month, Deutsche Bank economists noted in a research report last week.
That could drop even lower, to around 50,000 jobs per month, depending on whether the Trump administration’s immigration policies result in an outright decrease in the foreign-born population, they noted.
“If the break-even level of jobs growth is falling, then 147,000 jobs added might actually be inflationary,” Zhao said. “And if the unemployment rate stays low or keeps falling and inflation stays high — especially as tariffs make their way through the supply chain — the Fed might be pushed to keep rates higher for longer.”
