US June payrolls rise 57,000, unemployment rate at 4.2%

2026-07-02

The US Labor Department said on the 2nd that nonfarm payrolls rose by 57,000 in June from the previous month. The pace slowed from gains of more than 100,000 a month through May, while the unemployment rate fell 0.1 point from the previous month to 4.2%.

Growth falls short of market expectations

The increase missed the 100,000 to 115,000 rise expected by the market. Payroll figures for April and May were also revised lower, with April cut to 148,000 from 179,000 and May revised to 129,000 from 172,000.

Affects expectations for Fed rate hikes

As job growth slowed more than expected, US two-year Treasury yields fell immediately after the data release. Expectations also grew that the hawkish view within the Federal Reserve, which had favored monetary tightening, would ease slightly.

By industry, professional and business services, including consulting and accountants, led overall gains with an increase of 36,000. Health care and welfare also remained firm, supported by ageing-related hiring demand. By contrast, leisure and hospitality declined.

The unemployment rate was at its lowest level in a year. It has moved in a range of 4.3% to 4.4% from December 2025 through May 2026. Immigration restrictions under the Trump administration may be making it harder for the labor force to expand, and the labor force participation rate fell 0.3 point from May to 61.5%. Average hourly earnings rose 3.5% from a year earlier, in line with market expectations. The pace picked up slightly from 3.4% in May.

Consumer spending stays firm despite high prices

Against the backdrop of higher gasoline prices linked to turmoil in the Middle East, some industries facing labor shortages are raising wages to secure workers. If inflation accelerates, real incomes will struggle to grow and the impact will spread, especially among lower-income households, but US consumer spending has generally remained resilient.

Real personal consumption expenditures (PCE) in May, reflecting higher prices, rose 0.3% from the previous month on a seasonally adjusted basis. Growth accelerated again from April, when it was flat. In addition to cars and furniture, spending also increased on durable goods for recreation such as televisions and computers, as well as clothing. Higher-income households, less affected by inflation, helped boost spending.

Also, under tax cuts by the Trump administration, refunds tied to this spring's tax filings were larger than a year earlier. Many middle- and lower-income households are also drawing down savings to maintain their standard of living and continue spending, and such factors are seen supporting consumer spending.

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