US job growth likely cooled in June after recent string of big gains

U.S. job growth likely slowed to a still-solid clip in June, with the unemployment rate expected to hold steady at 4.3% for a fourth straight month, consistent with a stable labor market.

The anticipated moderation would follow three consecutive months of strong and above-expectations gains in nonfarm payrolls. Economists expected the Labor Department's closely watched employment report on Thursday to keep a September interest rate hike from the Federal Reserve on the table amid rising inflation from the U.S.-led war with Iran.

The report is being released a day early due to Friday's public holiday marking the United States' 250th anniversary of independence on Saturday.

"A few months ago, I was actually worried because we had lost jobs in five months," said Dan North, senior economist at Allianz Trade Americas. "We've seen the labor market firm up over the past three months, and I don't see any particular imbalance. We're in this very tiresome phrase of ‘no hire, no fire' labor market."

Nonfarm payrolls likely increased by 110,000 jobs last month after rising 172,000 in May, a Reuters survey of economists predicted. Estimates ranged from as low as 25,000 to as high as 200,000. Economists estimated the economy needs to create between zero and 50,000 jobs per month to keep up with growth in the working-age population. The so-called break-even rate has dropped because of an immigration crackdown that has reduced the labor force, keeping the unemployment rate stable.

Payrolls increased 214,000 and 179,000 in March and April, boosting the monthly average job gains in the three months through May to 188,000 compared to only 63,000 during the same period in 2025. Economists struggled to explain the improvement in job gains, but most agreed that a historically low level of layoffs was a big part of the increase in payrolls.

Despite facing uncertainties stemming first from tariffs last year and more recently the Middle East conflict, companies have been reluctant to let go of workers, after struggling to find labor in the aftermath of the COVID pandemic. The strength in payrolls has not been mirrored in other labor market surveys, including hiring plans by small businesses. A Conference Board survey on Tuesday showed the share of

consumers viewing employment as "hard to get" at near a 5-1/2-year high in June.

"The rather confusing thing is that the jobs numbers have been pretty strong, while all the other labor market indicators haven't been anywhere nearly as robust," said James Knightley, chief international economist at ING. "There is a little bit of caution that it could come to an end at any point; it could be that the relative softness in the business surveys starts to materialize in the payrolls numbers."

Downside risks

are diminishing

But with U.S. and Iran agreeing to a ceasefire, which has pushed oil prices back to pre-war levels, some economists believed the downside risks to the labor market had diminished and expected the recent trend in job growth, which has broadened out from healthcare, to prevail this year.

"The downside labor risks that prompted last year's rate cuts have not materialized," said Shruti Mishra, an economist at Bank of America Securities. "Combined with sticky inflation, that strengthens the case for reversing those cuts." Financial markets saw a roughly 50.7% chance that the Fed will raise rates at the September 15-16 meeting, according to CME Group's FedWatch tool. The U.S. central bank last month left its benchmark overnight interest rate in the 3.50%-3.75% range, but updated quarterly projections showed policymakers expected to raise borrowing costs this year.

The anticipated pullback in job growth in June was likely payback after some sectors, including local government, posted outsize gains.

Economists were split on the impact of the FIFA World Cup tournament, jointly being hosted by the United States, Canada and Mexico. Leisure and hospitality payrolls jumped 70,000 in May, with some economists attributing the rise to the tournament.

Economists at Goldman Sachs said a historical analysis suggested the World Cup could boost payroll growth by 40,000 in June, concentrated in the leisure and hospitality, professional and business services, and trade and transportation sectors.

Though JPMorgan analysts were not convinced that the World Cup pushed up leisure and hospitality payrolls in May, instead pointing to the Memorial Day holiday, which was early this year relative to 2025, they expected World Cup-related hiring to limit the payback from last month's surge in job gains in the sector.

The labor market is generating wage growth at a steady pace, with average hourly earnings forecast to increase 3.5% year-on-year in June after rising 3.4% in May. The lack of wage inflation has led some economists to argue that the Fed does not need to tighten monetary policy.

"Wage trends and the unemployment rate will be the two most important signals regarding whether stronger job growth is leading to a retightening in the labor market, putting upward pressure on wages and price inflation," said Veronica Clark, an economist at Citigroup. "So far, there are limited signs that this is the case."