The U.S. nonfarm payroll report for June exceeded expectations, adding 147,000 new jobs, well above the forecast. In addition, the unemployment rate unexpectedly dropped to 4.1%, surpassing market expectations.
After President Trump urged for a rate cut, the labor market showed remarkable resilience in June.
According to the report released by the U.S. Bureau of Labor Statistics on Thursday, June’s nonfarm payrolls increased by 147,000 after seasonal adjustments, higher than the expected 110,000. The unemployment rate fell to 4.1%, while the forecast was 4.3%.
In addition to job gains and a decline in the unemployment rate, average hourly earnings in June grew by 0.2%, a 3.7% year-on-year increase, indicating a slight easing of inflationary pressures. Moreover, the average weekly hours worked decreased from 34.3 to 34.2 hours.
Government employment saw a significant increase of 73,000 new jobs, surpassing all categories, fueled by robust growth in state and local government hiring, especially in education-related positions. Due to the efficiency measures by the government, federal employment decreased by 7,000.
Furthermore, the healthcare sector showed strong performance again, adding 39,000 jobs, while the social assistance industry added 19,000 jobs.
Following the release of the report, the U.S. dollar index regained strength at 97. The bond market experienced a sharp drop with yields soaring, particularly the 2-year Treasury yield surged by 12 basis points to 3.90%.
As signs of labor market slowdown become more evident, the impact of Trump administration’s tariff measures on inflation remains limited. The Labor Department’s report on Thursday raised more concerns among observers about the direction of the Federal Reserve’s monetary policy.
Trump has been urging the Fed to lower the benchmark interest rate. Since December of last year, the Fed has maintained the benchmark rate within the range of 4.25% to 4.5%. Meanwhile, the president posted on the social media app “Truth Social” on Wednesday, directly calling for Fed Chair Powell to “resign immediately”.
Powell is known for his cautious approach. On Tuesday, he mentioned that although a rate cut could be possible at any meeting, the strong performance of the U.S. economy provides the Fed with time to further assess economic data before making a rate cut decision.
The nonfarm payroll report once again dampened expectations of a rate cut by the Fed.
Following the release of the nonfarm payroll report, the probability of a rate cut in July plummeted from 20% to zero, and it is no longer considered a certainty for September.
According to the CME Group’s FedWatch report, the market continues to expect the next rate cut in September and has also revised down previous expectations of three rate cuts this year to two, believing that the likelihood of cuts has reduced to two times.