US hiring slows in June; leisure sector loses 61,000

U.S. nonfarm payrolls increased by 57,000 in June, the Labor Department reported. The unemployment rate declined to 4.2% from 4.3% in May. Average hourly earnings rose 0.3% month-over-month and 3.5% year-over-year. The labor force participation rate fell to 61.5% from 61.8%, and the broader underemployment rate dropped to 7.9% from 8.1%.

Sector-level data showed leisure and hospitality lost 61,000 jobs. Information employment declined by 9,000 and trade, transportation and utilities fell by 4,000. Education and health services added 69,000 positions, professional and business services added 36,000, construction added 11,000 and manufacturing rose by 3,000.

The May payroll figure was revised to a 129,000 gain. The consensus forecast for June had been 113,000. The ADP report released a day earlier showed private payrolls increased by 98,000, with services accounting for 96,000 of those gains and goods-producing sectors adding 2,000.

The Job Openings and Labor Turnover Survey for May reported 7.594 million vacancies. Education and health services recorded about 1.539 million openings and professional and business services about 1.485 million openings.

Market pricing from the CME FedWatch Tool indicated an 82.4% probability that the Federal Reserve would keep the target federal funds rate at 3.50–3.75% at the July meeting. For the September meeting, probabilities were split: 46.2% for holding rates at 3.50–3.75% and 46.0% for a rise to 3.75–4.00%.

The establishment payrolls figure and the household survey diverged in June: payrolls showed smaller hiring gains while the household measures produced a lower unemployment rate, alongside a drop in the labor force participation rate.