Don't Get Fooled by the Headline Beat, the Labor Market Remains Weak

This morning, the U.S. Bureau of Labor Statistics’ June nonfarm payroll data showed 147,000 jobs were added, compared to expectations for 111,000 and May’s upwardly revised 144,000.

The result was below the typical June gain of 295,000 employees.

This brought the year-to-date monthly average gain to 130,300, down from 167,700 in 2024 and the 190,500 average from 2015–2019.

At the same time, the unemployment rate fell to 4.1% from 4.2%. However, it’s worth noting that the average monthly total for unemployed people has remained around 7.1 million this year—the highest since 2016’s 7.8 million.

Yet despite the headline beat, the surge in government hiring (73,000 in June vs. 7,000 in May) combined with weak private payrolls (74,000 in June vs. 137,000 in May) may cause investors to question the quality of last month’s number.

At the end of the day, the pace of hiring continues to slow. There have been 782,000 new hires this year, compared to the 1.6 million average year-to-date gain since 2015. That should continue to support the case for Federal Reserve rate cuts later this year.