Nonfarm Payroll Growth Likely to Decelerate in June, UBS Says

12:57 PM EDT, 06/30/2025 (MT Newswires) -- Employment gains in the US are likely to slow down in June sequentially, though not enough to put pressure on the Federal Reserve to ease monetary policy at its next meeting, UBS Securities said in a note e-mailed Monday.

The brokerage expects the world's largest economy to add 100,000 nonfarm payrolls this month, compared with a 139,000 gain reported for May. Government data are expected to show Thursday that the US added 110,000 nonfarm jobs in June, according to a Bloomberg poll.

"Hiring appears to have slowed in the last eight to 10 weeks, and we expect that to weigh on the June increase in nonfarm payroll employment," UBS economists, including Jonathan Pingle, wrote in a note to clients. Private employment is projected to rise by 95,000 for the month, while federal government roles are forecast to increase by 5,000, UBS said.

The brokerage said it would expect a three-month moving average of nonfarm payroll employment to end up being approximately 115,000 a month.

"If the June gain is quite weak, or the three-month moving average of private employment revises to below (100,000) per month, odds of a July rate cut to take out some restrictiveness in monetary policy and the forwards would rise," Pingle wrote. "Our projection is probably good enough to keep the (Federal Open Market Committee) comfortable with waiting a little longer, and consistent with our expectation for the next rate cut at the September FOMC meeting."

US President Donald Trump has repeatedly called on the Fed to cut interest rates.

Earlier this month, the FOMC kept its benchmark lending rate unchanged for a fourth consecutive meeting. Last week, Fed Chair Jerome Powell said the FOMC can continue to wait and evaluate how the US economy responds to policy changes before it adjusts its monetary policy. The economy is in a "solid position" despite elevated uncertainty levels, while the unemployment rate remains low, according to Powell's prepared remarks to the House Committee on Financial Services.

UBS expects unemployment rate to increase to 4.3% this month from 4.2% in May, representing the highest rate since 2021, according to the note. Continuing claims have moved higher, while the hiring slowdown should decelerate outflows at longer durations of unemployment, according to Pingle.

Fed Vice Chair for Supervision Michelle Bowman recently said she would support lowering interest rates as soon as next month, provided that inflationary pressures remain "contained." Separately, Fed Governor Christopher Waller reportedly said the FOMC may be in a position to ease monetary policy "as early as July."

Markets are currently pricing in probabilities of 19% and 76% for a 25-basis-point rate reduction in July and September, respectively, according to the CME FedWatch tool.

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