U.S. payrolls increased by 147,000 in June, more than expected

Job growth proved better than expected in June, as the labor market showed surprising resilience and likely taking a July interest rate cut off the table.

Nonfarm payrolls increased a seasonally adjusted 147,000 for the month, higher than the estimate for 110,000 and just above the upwardly revised 144,000 in May, the Bureau of Labor Statistics reported Thursday. April’s tally also saw a small upward revision, now at 158,000 following an 11,000 increase.

The unemployment rate fell to 4.1%, the lowest since February and against a forecast for a slight increase to 4.3%. A more encompassing rate that includes discouraged workers and those holding part-time positions for economic reasons edged down to 7.7%.

Though the jobless rates fell, it was due largely to a decrease in those working or looking for jobs.

The labor force participation rate fell to 62.3%, its lowest level since late 2022 as the labor force, owing to an increase of 329,000 of those not counted in the labor force. The household survey, which is used to calculate the unemployment rate, showed a smaller gain of just 93,000. The ranks of those who had not looked for a job in the past four weeks swelled by 234,000 to 1.8 million.

Stock market futures held positive following the report while Treasury yields rose sharply in a trading session that will end early ahead of the Independence Day holiday Friday in the U.S.

“The solid June jobs report confirms that the labor market remains resolute and slams the door shut on a July rate cut,” said Jeff Schulze, head of economic and market strategy at ClearBridge Investments. “Today’s good news should be treated as such by the markets, with equities rising despite the accompanying pickup in interest rates.”

Along with the solid payroll gains and fall in the unemployment rate, average hourly earnings increased 0.2% for the month and 3.7% from a year ago, indicated little upward pressure on wage-related inflation. The average work week moved slightly lower to 34.2 hours.

Government employment posted a large gain, leading all categories with an increase of 73,000 due to solid boosts in state and local hiring, particularly in education-related jobs. Federal government, which is still feeling the impact of cuts from Elon Musk’s Department of Government Efficiency, lost 7,000.

In addition, health care again was strong, adding 39,000, while social assistance contributed 19,000.

The report comes with an intensified focus on where the Fed heads with monetary policy as signs increasingly appear of a slowing labor market while President Donald Trump’s tariffs thus far have produced a muted impact on inflation.

Trump has demanded the Fed lower its benchmark interest rate, which it has kept steady in a range between 4.25%-4.5% since December. Along with that, the president on Wednesday up the stakes, saying in a Truth Social post that Powell “should resign immediately.”

For his part, Powell has kept a cautious tone on policy. In an appearance Tuesday, the central bank leader said that while every meeting is on the table for a rate cut, the strength of the U.S. economy is affording time to evaluate the incoming data.

Market pricing shifted strongly following the payrolls report, with traders all but taking the chance of a July rate cut off the table. Odds for a July move fell to 4.7%, down from 23.8% on Wednesday, according to the CME Group’s FedWatch. The market continues to see the next reduction not coming until September and also reversed expectations for three total cuts this year, with the likelihood now reduced to two.

There had been some speculation ahead of the report that a weak number was possible, with private payrolls service ADP on Wednesday reporting a loss of 33,000. However, the BLS report showed a gain of 74,000 in that category.

Those getting jobs titled strongly to full-time positions, which increased by 437,000. Part-time workers fell by 367,000.