The US jobs report for June 2025 shows that non-farm payrolls increased by 147,000, exceeding the expected rise of 110,000. The previous month’s figure was adjusted from 139,000 to 144,000. The two-month net revision amounted to +16,000, compared to a prior -95,000. The unemployment rate dropped to 4.1%, better than the expected 4.3% and down from 4.2% last month. The labor force participation rate fell slightly to 62.3% from 62.4%. Average hourly earnings remained the same compared to last month and last year, while expectations were +0.3% and +3.9%, respectively. Workers put in an average of 34.2 hours a week, a bit below the expected 34.3. Private payrolls grew by 74,000, falling short of the expected 105,000, marking the lowest growth since October 2024.

Key Insights on Employment Trends

Manufacturing payrolls saw a small increase of 7,000, against a predicted drop of 5,000. Government jobs rose by 73,000, and full-time jobs jumped by 437,000, while part-time jobs fell significantly by 367,000. The household survey reported an increase of 93,000 jobs. In the markets, the USD/JPY rose from 143.87 to 144.97, with yields increasing by 3-9 basis points. Most new jobs were in government, especially within state and local education sectors. Overall, the picture is mixed, showing more strength than the main figures might suggest. Although the payroll gain of 147,000 is higher than expected, the net revision of +16,000 does not indicate a major surprise. This points away from the idea that the labor market is rapidly weakening. The drop in the unemployment rate to 4.1%, down from 4.2%, adds pressure to the notion that the job market is weakening. However, the slight decline in labor force participation to 62.3% adds complexity to the situation. Fewer people looking for work can make a lower unemployment rate easier without genuine improvements in job creation. Wage data is perhaps the most revealing part — showing no growth month-on-month and only 3.9% year-on-year. This suggests that pay increases are not reaching levels that would typically signal strong inflation pressure. The Federal Reserve may focus more on this, especially since average hourly earnings have not increased, and hours worked have dipped slightly. This hints at a decrease in income momentum, easing worries about inflation driven by demand.

Market Reactions and Economic Implications

Private sector hiring raises concerns, with only 74,000 new jobs created, well below expectations. This signals a cooling trend. Smaller businesses, particularly those not reliant on government, appear more hesitant to hire. In contrast, nearly half of the new jobs were in government, which is less influenced by economic changes. Manufacturing performed better than expected, but with only a 7,000 increase, it does not indicate a significant resurgence. This reflects resilience rather than growth. A slight drop in average work hours suggests employers are managing labor needs by reducing hours instead of increasing staffing. The household survey’s 93,000 increase in jobs aligns with the slower trends we’ve observed, but the changes warrant attention. Full-time jobs increased significantly, while part-time positions fell by over 360,000. This suggests a shift toward more stable employment, possibly due to competition for fewer positions or part-time jobs being converted to full-time. This highlights a trend: more people are looking for stable hours, and employers are adjusting carefully. The reaction in currency and bond markets was swift. The US dollar strengthened, and yields increased, reflecting lower expectations for immediate interest rate cuts. Investors noted the private payroll and wage disappointments but interpreted the drop in unemployment and government hiring as signs of resilience, reducing the urgency for cuts. This indicates that the job data carries enough strength to outweigh immediate concerns about easing. As traders, we see this as a crucial moment. Risks still exist, but volatility has become more data-driven. Our strategies should consider not just rate expectations but also the nature and quality of job growth. These developments should not be seen as a clear trend but as a shift in short-term views. In the following weeks, we can expect to reassess this report as inflation data and corporate earnings provide more context. The gap between private and public hiring suggests caution in interpreting reported job strength as genuine growth. Create your live VT Markets account and start trading now.

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