U.S. June payrolls rise 57,000, sharply missing 110,000 estimate

Piero Cingari Fri, July 3, 2026 at 3:01 PM PDT 7 min read

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Editor's note: This article was updated to add more detail and context.

The U.S. labor market cooled in June, with employers adding 57,000 jobs — falling short of the 110,000 economists had expected and sharply decelerating from May's reading of 129,000.

The unemployment rate edged down to 4.2%, below the 4.3% consensus.

Average hourly earnings rose 0.3% on the month, matching the 0.3% expected, and were up 3.5% from a year earlier. Economists had looked for annual wage growth to quicken from 3.4% to 3.5%.

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The April nonfarm payrolls gain was revised lower to 148,000 from the previously reported 179,000, while May payroll growth was cut to 129,000 from 172,000. Combined, the revisions reduced employment gains for the two months by 74,000 jobs.

The data is the first employment reading since the Fed's June 17 meeting, when Chair Kevin Warsh's committee held rates at 3.50% to 3.75% but turned its projections sharply hawkish.

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Where the Jobs Were Added

Professional and business services added 36,000 jobs, social assistance added 25,000, and health care added 22,000 — though even health care's gain trailed its recent pace.

The clear weak spot was leisure and hospitality, which shed 61,000 jobs on softer-than-usual seasonal hiring.

Manufacturing, retail, transportation, financial activities, and government were all little changed.

The dip in the unemployment rate to 4.2% also flattered an otherwise soft report. It came alongside a 0.3 percentage point drop in the labor force participation rate to 61.5%, meaning the jobless rate fell in part because people left the workforce, not because more of them found jobs. The employment-to-population ratio slipped as well.

Why a Weak Jobs Report Is Good News for Markets

After a hawkish Fed spent June warning that its next move could be a hike, a cooling labor market and sizable downward revisions strip the urgency out of any near-term action. The report gives Warsh's committee room to stay on hold rather than tighten in July.

Traders moved fast after June's jobs print. According to the CME FedWatch Tool, the probability of a rate hike at the Fed's July 29 meeting collapsed to about 22%, with a hold now the overwhelming favorite at 78%.

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The timing helped. Crude oil has tumbled to around $67 a barrel from above $90 in early June as the energy shock from the war with Iran fades. With the single biggest driver of this spring's inflation spike now in retreat, a weaker labor market hands the Fed cover to wait. Only weeks ago, after the Fed's hawkish June projections and a spike in oil prices, markets had been leaning toward near-term tightening.

Market Reaction

The cross-asset move was textbook risk-on.

As of 8:49 a.m. ET:

• S&P 500 futures rose 0.39%
• Nasdaq 100 futures gained 0.67%
• Dow futures added 0.55%
• Russell 2000 futures (small caps) led the way, up 0.84% — a classic response to fading rate-hike fears

The iShares Russell 2000 ETF hit fresh record highs on Wednesday.

The rate-sensitive 2-year Treasury yield fell to 4.121%, down about 5 basis points on the session, as hike bets unwound.

The U.S. dollar index slid 0.7% to 100.36, and gold surged 1.5% to around $4,124 an ounce on the prospect of a less aggressive Fed.

WTI crude eased 0.59% to $67.47 a barrel.

Image: Shutterstock

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