The U.S. labor market significantly undershot expectations in June, adding only 57,000 jobs — less than half the 115,000 forecast by economists surveyed by Dow Jones. The surprisingly weak payroll growth, published by the Labor Department on Thursday, reignited speculation that the Federal Reserve will delay further interest rate hikes, potentially boosting risk assets like cryptocurrencies.
Despite the hiring miss, the headline unemployment rate inched down to 4.2% from 4.3%, marking its lowest level in a year. However, the decline was largely driven by a shrinking workforce: the labor force participation rate fell 0.3 percentage points to 61.5%, its lowest since March 2021, and household employment plunged by 507,000. The broader U-6 underemployment rate eased to 7.9%.
The report painted a picture of a cooling but not collapsing labor market. While professional and business services added 36,000 jobs, social assistance 25,000, and healthcare 22,000, the leisure and hospitality sector lost 61,000 positions as seasonal hiring disappointed. Further, the Labor Department revised April and May payrolls down by a combined 74,000 jobs, confirming hiring had been softer than initially reported. Average hourly earnings rose 0.3% to $37.64, keeping annual wage growth at 3.5%, but Fed officials have said labor costs are no longer a key inflation driver.
Markets reacted swiftly: the probability of a July rate hike plunged to less than 20%, down from earlier expectations. Futures now imply roughly a 60% chance of a hike in September, compared with around 75% before the data. "The headline gain of 57,000 jobs is clearly disappointing, but it follows a familiar pattern... Ironically, today's report may be one reason the Fed does not deliver insurance rate hikes at the September FOMC meeting," said one analyst. The data adds to evidence that higher borrowing costs are weighing on hiring, reducing the urgency for near-term tightening — an outlook that typically improves liquidity conditions and investor appetite for crypto assets.
