U.S. jobs market slips in June as unemployment ticks down

U.S. employers added 57,000 new positions in June, far fewer than expected as unemployment inched down to 4.2%, a rate reflecting the impacts of a shrinking domestic labor participation pool.

Thursday’s Employment Situation Summary from the Labor Department found employers in professional and business services added 36,000 new jobs last month, social assistance services grew by 25,000 positions and the healthcare sector grew its employee rolls by 22,000 in June. But employment in leisure and hospitality industries shrank by 61,000 last month thanks to weaker than usual seasonal hiring, according to the new report.

The monthly Dow Jones consensus estimate had projected 115,000 new jobs in June.

Labor Department analysts also made sizable downward revisions to previous months’ reporting, downsizing April’s job numbers from 179,000 to 148,000 and reducing the May jobs count from 172,000 to 129,000.

June’s unemployment rate moved down 0.1% from the May reading, largely driven by a drop in the national labor force participation rate which moved down 0.3% to 61.5%, the lowest level since March 2021.

While the hiring rate in 2026 has so far easily outpaces the last six months of 2025, where monthly job figures were solidly in the negative, the current “no hire, no fire” trend may be a reflection of ongoing economic challenges due to international conflict and still rising U.S. inflation.

“We are in a market that is still very fragile, and still susceptible to shocks happening,” Nicole Bachaud, labor economist at ZipRecruiter, an online job platform, told the Associated Press. “There is still a lot of hesitation on the part of employers and workers themselves to make any moves.”

Bachaud noted that other government data shows companies are posting more jobs but not filling them.

U.S. inflation continues to rise

The latest federal inflation data reflects prices on U.S. consumer goods and services that continue to tick up, driven by fallout from the Iran war and tariff impacts.

Last week’s Personal Consumption Expenditures Index pegged overall inflation at 4.1% in May, the highest since April 2023.

On a monthly basis, housing and utilities costs rose 0.3% in May, healthcare costs were up 0.4% and grocery prices rose by 0.1%.

The PCE reading is the Federal Reserve’s preferred inflation measure and the May data is likely to only add pressure for the U.S. central bank to address persistent consumer price increases.

The monetary body has taken a pause on interest rate adjustments so far this year after ending 2025 with three straight rate cuts. In January, forward-looking statements from the Fed suggested two more rate reductions could be in the offing in 2026. That optimism, however, has evaporated in the face of supply shock impacts, particularly in the petroleum industry, since the U.S. and Israel launched attacks on Iran in late February.

Newly installed Fed chairman Kevin Warsh vowed that the fight to move inflation back to the body’s target annual rate of 2% was ongoing, but didn’t go as far as saying that the effort would include an interest rate increase.

Interest rate adjustments are the Fed’s primary tool for maintaining its dual mandate of maximum employment and price stability. Generally speaking, higher rates raise the cost of debt, slow the economy and reduce inflation. Lower rates reduce the cost of borrowing and boost the jobs sector.

During an international conference of central banks in Portugal on Wednesday, Warsh reiterated the Fed’s commitment to bringing down inflation.

“If there were people in household or the business sector, in the financial markets, who thought that this central bank was going to be comfortable with an inflation objective above 2%, well, I guess they’d be disappointed,” Warsh said, per a report from CNBC. “We’re going to deliver price stability in the U.S.”