The US labor market has registered a sharp slowdown after the official report of nonfarm payrolls for June increased by only 57,000. The report from the Bureau of Labor Statistics (BLS) on Thursday turned out to be much worse than the Dow Jones consensus forecast of 115,000 new jobs.
The market shock was further exacerbated by a series of downward trends in previous months' data, with May's figure falling by 43,000 while April's figure fell by 31,000 to 148,000. This series of lackluster data proves that the structure of US corporate employment growth is actually moving much more slowly than previously optimistic market analysts had expected.
However, the unemployment rate unexpectedly fell to 4.2%. The BLS explained that the drop in the unemployment rate is not a positive sign, but rather due to a drastic decline in the labor force participation rate, which fell to 61.5%, the lowest level since March 2021, after the market lost 507,000 active individuals from the household sector.
The industry breakdown saw the professional services sector leading the gains with an increase of 36,000 jobs, followed by social assistance and the health sector. On the other hand, the leisure and hospitality sector recorded heavy losses after losing 61,000 jobs due to a slowdown in seasonal hiring, thus extinguishing Goldman Sachs' speculation that the stimulus impact from the World Cup would be achieved.
The lackluster report is expected to change the optimistic forecast of the Federal Reserve (Fed) which previously described the labor market as "stable". Fed Chairman Kevin Warsh, who has remained tight on liquidity to combat inflation due to the Iran war and tariff restrictions, is likely to have to reassess the futures market's plan, which had previously bet on another interest rate hike in September.
