Key facts
- The US economy added 57,000 jobs in June, falling short of economists' expectations.
- The unemployment rate decreased to 4.2% in June.
- Labor force participation dropped in June.
- The two-year Treasury yield fell six basis points following the jobs report.
- Market expectations for a July Fed rate hike decreased significantly.
The U.S. economy added just 57,000 jobs in June, a significant miss compared to the 113,000 economists had anticipated. This slowdown in job growth was accompanied by a decrease in the unemployment rate to 4.2%, down from previous expectations of 4.3%. The labor force participation rate also declined.
Sectors like leisure and hospitality, which showed strength in May, saw a slowdown in June, while healthcare continued to add jobs but at a reduced pace. Despite the weaker headline number, some economists noted that the overall trend of firm employment data persists, with an average of 111,000 jobs added over the past quarter.
The weaker-than-expected jobs report has influenced market expectations regarding Federal Reserve policy. Traders have significantly lowered the probability of a rate hike at the Federal Open Market Committee's July meeting, with the market now pricing in an 82% chance of rates remaining unchanged. The odds of the Fed keeping rates steady for the entire year also increased.
In response to the jobs report, major stock indexes saw an uptick, and yields on two-year Treasury notes, which are highly sensitive to Fed policy, dropped by six basis points. Chip stocks, which had experienced a downturn, also saw gains.