US payrolls miss forecasts as hiring slows

US employers added 57,000 non-farm payrolls in June, well below the 110,000 expected, data showed Thursday. The prior reading was 172,000, and private payrolls rose 49,000 against expectations for 110,000, pointing to a sharper loss of hiring momentum outside government.

Average hourly earnings rose 0.3% from May and 3.5% from a year earlier, both in line with expectations. Average weekly hours held at 34.3, matching forecasts, suggesting the inflation signal from wages was steadier than the headline jobs miss.

Participation drop clouds 4.2% jobless rate

The unemployment rate fell to 4.2% from 4.3%, better than the 4.3% expected. The decline came with labor-force participation dropping to 61.5% from 61.8%, a combination that makes the lower jobless rate less reassuring for policymakers watching labor supply and demand.

The report interrupts a recent pattern of continued job creation and a relatively steady unemployment rate. Payroll growth had averaged about 188,000 over the three months through May, supported by gains in services, health care, social assistance, leisure and hospitality, and government hiring.

For rates, the mechanism is straightforward: weaker payroll growth lowers confidence that demand can keep absorbing restrictive policy, while steady wage growth limits the case for an aggressive easing signal. If bond markets focus on the hiring miss, yields could face downside pressure; if they focus on wages holding at 3.5%, the move may be more contained.

The next test for rates comes in the 48 hours after the July 2 release, as investors reprice the labor-market path and any central-bank reaction function tied to employment.