US Adds 147,000 Jobs in June, Private Sector Lags at 74,000

In June, the United States saw a significant increase in job additions, with 147,000 new positions created. This figure surpassed forecasts and was largely driven by a hiring surge in the public sector, particularly in state and local government education roles. However, when excluding these government jobs, the private sector added only 74,000 jobs, marking the lowest increase since October. This slowdown in private hiring was particularly evident in sectors such as manufacturing, wholesale trade, and business services, which actually saw a reduction in workforce.

Health care was one of the few bright spots, adding 59,000 positions, although this was its weakest gain in four months. The leisure and hospitality industry picked up 20,000 jobs, but this increase was offset by a downward revision to May’s employment figures. The overall slowdown in private hiring comes at a time when the administration is pushing for tax cuts and employers are grappling with the uncertainties of the trade policy.

Analysts attributed the slowdown in private hiring to several factors, including the administration's tariff hikes, tight monetary conditions, and growing concerns about the escalating trade war. Samuel Tombs, chief economist at Pantheon Macroeconomics, noted that private demand for labor is slowing, and employers are pulling back due to these economic pressures. The jobs report, compiled from two separate surveys—one of employers and one of households—revealed a decrease in the number of unemployed individuals for the first time in five months. However, the labor force participation rate slipped, indicating that people are either finding work or giving up on the job search.

Despite the manufacturing sector's lag, the labor market remains resilient, with real average hourly earnings experiencing their largest increase of the year. Joe Gaffoglio, CEO of Mutual of America Capital Management, highlighted this resilience, while Ian Lyngen, who runs US rates strategy at BMO, suggested that the Federal Reserve is unlikely to act on rate cuts this month, with expectations now focused on the September meeting. Jeffrey Roach, chief economist at LPL Financial, noted that businesses are still willing to expand despite the tariff noise, allowing the Fed to maintain a wait-and-see approach. However, Simon Dangoor, who heads macro strategies at Goldman Sachs Asset Management, cautioned that the labor market's stability may not last, and the Fed could ease policy later in the year if inflation does not pick up.

Allison Schrager, a senior fellow at the Manhattan Institute, pointed out that the economy has been outperforming expectations despite widespread anticipation of a slowdown. She cited strong employment reports, job openings, and inflation data as indicators of the economy's current strength. Eric Merlis, co-head of global markets at Citizens, echoed this sentiment, noting that the labor market held together in June despite geopolitical worries and tariff issues. Wages remained stable, avoiding any inflationary pressures and allowing the Fed to continue monitoring the situation. Jeff Schulze, who leads market strategy at ClearBridge Investments, emphasized that the June report effectively ruled out any rate cut in July, citing increased job numbers, a lower unemployment rate, and revised gains from the previous two months. He also noted that wage growth remained soft, suggesting that inflation is not yet a concern.