June Nonfarm Payrolls Top Estimates; Unemployment Rate Unexpectedly Falls

10:34 AM EDT, 07/03/2025 (MT Newswires) -- The US economy added more jobs than projected in June, while the unemployment rate unexpectedly ticked down, according to government data released Thursday.

Total nonfarm payrolls rose by 147,000 last month, the Bureau of Labor Statistics reported. The consensus was for a 106,000 increase, according to a survey compiled by Bloomberg. Gains for May were revised up by 5,000 to 144,000 and by 11,000 for April.

The unemployment rate moved down to 4.1% in June from 4.2%, compared with the Street's view for an increase to 4.3%.

"Job gains were narrowly-based, however, with a spike in state and local government employment likely driven by seasonal factors explaining more than half of the increase in payrolls," Oxford Economics Lead US Economist Nancy Vanden Houten said in remarks emailed to MT Newswires.

Government employment rose by 73,000 last month, with state jobs rising by 47,000, according to the report. Federal jobs fell by 7,000.

Private payrolls advanced by 74,000 in June, slowing down from a 137,000 gain the month prior, according to the BLS report. The consensus on Bloomberg was for an increase of 100,000. The service industry added 68,000 positions, while the goods-producing sector recorded 6,000 job additions following a drop of 4,000 roles in May, the data showed.

Average hourly earnings grew by 0.2% sequentially, trailing the market estimate for growth of 0.3%. The annual measure rose 3.7%, falling short of the 3.8% rise modeled by analysts.

"Absent this spike (in state and local government payrolls), the employment report would have come in roughly on-par with expectations," Andrew Foran, economist at TD Economics, said in a report. "This combined with the cooling in average hourly earnings is indicative of a stable but slowing labor market, which we expect to gradually apply upward pressure to the unemployment rate through the second half of the year."

Last week, Federal Reserve Chair Jerome Powell said that the world's biggest economy was in a "solid position" despite elevated uncertainty levels, while the unemployment rate remains low. Policymakers can continue to wait and evaluate how the economy responds to policy changes before the central bank adjusts its benchmark rate, he told US lawmakers.

President Donald Trump has repeatedly called on the Fed to cut interest rates. On Tuesday, Powell said Trump's tariff rollout has prompted the central bank to hold steady on rates rather than cut.

The latest employment report is strong enough for the Fed to stay put as it evaluate the impact of tariffs on inflation, according to Vanden Houten. "We expect the inflationary impact of tariffs to have peaked by the fourth quarter, allowing the Fed to start cutting rates in December," she said.

Markets are currently pricing in probabilities of 6.7% and 69% for a 25-basis-point rate reduction in July and September, respectively, according to the CME FedWatch tool.

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