The June jobs report showed that hiring stayed solid in June, while the unemployment rate unexpectedly fell. One big surprise: Half the hiring came from government jobs, which may just reflect seasonal adjustment issues. The S&P 500 rose moderately after the jobs report, as did the 10-year Treasury yield.
Odds of a Federal Reserve rate cut at the July 30 meeting tumbled after the jobs report. Three factors may lead the Fed to slow-walk rate cuts: Trump tariffs are expected to start pushing up inflation; an immigration crackdown may weigh on labor force participation and the One Big Beautiful Bill Act will provide a fiscal boost.
Cadence Design Systems and Synopsys traded atop the S&P 500 in Thursday's premarket session after the Trump administration cleared the way for renewed sales of the chip-design software to Chinese customers as part of the U.S.-China trade framework that freed up exports of rare earth magnets to the U.S.
9:48 a.m. ET
Wall Street Reaction To Jobs Report
"Private payrolls excluding health care and education rose by just 23K, well below the 50K average pace in the previous 12 months," wrote Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics. "Fundamentally, then, this is a weak report."
Tombs highlighted slipping wage growth as evidence of slack in the labor market, which suggests to him that the drop in the unemployment rate may be statistical noise. Stay tuned!
However, Eric Teal, chief investment officer for Comerica Wealth Management, wrote, "Immigration has been a big part of the labor supply and as these demographics shift, we anticipate the unemployment rate to continue to ratchet lower with the potential to put upward pressure on wages."
Despite expectations that rate cuts may be "a ways off," Teal expects continued positive momentum for the stock market, with an assist from passage of the One Big Beautiful Bill Act and its support for capital investment and research and development.
9:46 a.m. ET
S&P 500 Update
The S&P 500 rose 0.5% in early Thursday stock market action after the jobs report, aiming for another record high after finishing in uncharted territory on Wednesday.
The 10-year Treasury yield has climbed four basis points to 4.33%, easing off earlier highs as Wall Street realized that the jobs report has a soft underbelly. Still, the fall in labor force participation and the unemployment rate may be a big deal, if sustained.
9:23 a.m. ET
Who Is Hiring?
Apart from an increase in government payrolls, mainly educators, the bulk of job gains came in health care and social assistance, which added 58,600 jobs. The leisure and hospitality sector added 20,000 jobs, while construction employment rose by 15,000.
On the downside, manufacturers shed 7,000 jobs, wholesalers 6,600, and temporary help services 2,600.
9:15 a.m. ET
Slower Wage Growth, Shorter Workweek
Average hourly pay rose 0.2% on the month, below 0.3% forecasts. That lowered 12-month wage growth to 3.7% from 3.9%.
A shorter workweek in June offered another potential indication of a cooling job market. The average workweek slipped to 34.2 hours from 34.3 hours.
In combination, the drop in total hours worked, slim pay gains and soft hiring meant that aggregate pay was flat on the month, a negative for consumption.
9:10 a.m. ET
More Jobs Report Details
Job gains for April and May were revised up a combined 16,000. Over the past three months, nonfarm payroll gains have averaged 150,000 per month, including 115,000 in the private sector.
The three-month trend suggests no reason to panic that private-sector job gains slowed to 74,000 in June. However, a diffusion index measuring the breadth of private sector hiring fell to 49.6 from 51.8 in May. Readings below 50 indicate that more industries are cutting jobs than adding jobs.
9:01 a.m. ET
One Fed Rate Cut Just Got Wiped Out
Ahead of the jobs report, markets were leaning toward 75 basis points in Fed rate cuts this year, with a 68% likelihood of at least three quarter-point rate cuts. That just shrunk by more than half to 32%. Markets now see 50 basis points in cuts as likely, though odds of no more than one quarter-point rate cut rose to 24% from 9% on Wednesday.
8:55 a.m. ET
Federal Reserve Rate-Cut Odds Sink
Markets are pricing in just 5% odds of a Fed rate cut at the July 30 meeting, down from about 25% ahead of the jobs report. While private-sector hiring fell short of forecasts, the drop in the unemployment rate will keep the Fed on hold because it signals less slack in the labor market.
The household survey data from which the unemployment rate is derived comes with a larger margin of error than the employer survey that yields monthly payroll jobs data. It's possible that the June data is sending a misleading signal. However, the dip in unemployment gibes with what economists have been saying: The Trump administration's crackdown on immigration means that the U.S. economy doesn't need to create as many jobs to keep up with a slower-growing workforce.
8:45 a.m. ET
Jobless Claims Slip
Initial claims for unemployment benefits slipped to 233,000 in the week through June 28 from a revised 237,000 the prior week. That undercut 240,000 estimates.
Ongoing claims for unemployment benefits held steady at 1.964 million.
8:37 a.m. ET
Jobs Report Vs. Forecasts
Employers added 147,000 payroll jobs in June, comfortably beating expectations of a 110,000 increase. However, private-sector job gains fell short of 100,000 forecasts, as private employers added 74,000 jobs.
Government jobs surged by 73,000, with 63,500 of those jobs in education, suggesting a seasonal adjustment issue.
The unemployment rate ticked down to 4.1%, defying expectations of an increase to 4.3%. The decline in unemployment came as 130,000 people left the labor force.
Jobs Report Expectations
Economists expect the June jobs report to show that employers added 110,000 nonfarm payroll jobs last month, with a gain of 100,000 in the private sector. Forecasts for the headline job gain range between 70,000 and 130,000.
The unemployment rate is seen edging up to 4.3% from 4.2%, with forecasts ranging between 4.2% and 4.4%.
ADP, Jobless Claims Point To Weak Report
Payroll processor ADP estimated that private employers added just 33,000 jobs last month, after a downwardly revised 60,000 gain in May. That fueled some expectations of a soft official monthly jobs report, though economists note that ADP has a poor track record of predicting BLS data.
Jobless claims data also moved higher between the May and June mid-month surveys of employers and households. The four-week average of initial jobless claims rose by 14,750 to 245,750, while the number of people continuing to claim unemployment benefits rose by 67,000 to 1.974 million.
There is one data point suggesting that the job market held up fine in June. Withheld income and employment taxes rose a healthy 5.9% from mid-May to mid-June, accelerating from more modest growth in April and May.
Fed Rate-Cut Odds
Ahead of the June jobs report, markets are pricing in 25% odds of a Fed rate cut at the July 30 meeting, up from 21% a week ago, according to CME Group's FedWatch tool. Odds of a rate cut by the Sept. 17 Fed meeting stand at 95%.
Markets are now tilting toward a likelihood of 75 basis points in rate cuts this year (62% odds) vs. 50 basis points or less (38% odds).
S&P 500
S&P 500 futures edged up 0.1% early Thursday. On Wednesday, the S&P 500 rose 0.5%, pushing its year-to-date gain to 5.9%.
The 10-year Treasury yield eased three basis points Thursday morning, to 4.26%.
Be sure to read IBD's The Big Picture column after each trading day to get the latest on the prevailing stock market trend and what it means for your trading decisions.
