Job growth softened considerably in June after a string of outsized monthly gains during the first half of 2026, newly released government estimates show.

The Bureau of Labor Statistics (BLS) reported Thursday that nonfarm payrolls netted 57,000 positions last month compared to 214,000 in March, 148,000 in April and 129,000 in May. A revision in Thursday’s report slashed 43,000 jobs from initial May estimates and 31,000 from April estimates.

The U.S. unemployment rate fell to 4.2%, its lowest reading since last June, having held at 4.3% since March.

“Overall, this report shows a job market that is a bit shakier than the May data had indicated, but inflation still remains too high,” said Mike Fratantoni, chief economist of the Mortgage Bankers Association (MBA), in commentary shared with Scotsman Guide.

Economists surveyed by Reuters had forecast job gains of 110,000, while economists polled by Dow Jones had expected 113,000. June’s payroll gains also missed consensus forecasts of 113,000 from Bloomberg economists.

The BLS separately reported this week that the pace of hiring slowed in May even as the number of job openings exceeded expectations. While consumer confidence brightened slightly in June, workers’ perceived difficulty in landing a job rose to its highest level since January 2021, reported The Conference Board.

As opposed to a pickup in hiring, Fratantoni attributed last month’s dip in the unemployment rate to a slide in the labor force participation rate, which has never recovered to pre-pandemic levels of between 62.6% and 63.3% from 2017 through early 2020.

With more than 830,000 fewer people in the labor force during June than May, the participation rate fell 30 basis points to 61.5% — its lowest level since March 2021. The COVID-19 vaccine first became available in the U.S. on a limited basis in December 2020.

“MBA expects the Federal Reserve will keep the federal funds rate unchanged through the remainder of this year, but anticipates that their next move will be a hike in early 2027,” said Fratantoni, to counter accelerating inflation which has been above the Fed’s stated 2% target for more than five years.

Concerning trends

Despite millions of unfilled jobs nationwide, employers have been cautious to hire more robustly as economic volatility, concentrated spending by upper-income consumers and advancements in AI have clouded hiring needs.

Some economists have warned that the volume of jobs added in recent months has obscured their heavy concentration in just a few sectors. Around 90% of the jobs added in May were in healthcare, leisure and hospitality and local government roles.

“The stability of a stagnant labor market depends entirely on separations staying this scarce or, conversely, hires remaining subdued,” said Laura Ullrich, director of economic research for North America at the Indeed Hiring Lab, in commentary published Thursday.

From 40,000 job gains in May, the leisure and hospitality sector shed 61,000 in June, according to the BLS, a reversal of more than 100,000 during a month when summer hiring would typically be in full swing — and potentially amplified by World Cup crowds.

“The labor market still looks steadier than it did last year, but the momentum is less convincing than it looked a month ago,” said Sam Williamson, senior economist at title insurance giant First American Financial Corp.

Hiring among retailers fell by about 7,500, another signal that elevated gas prices and resurgent inflation may be taking a toll on consumers and sectors reliant on discretionary spending.

Modest hiring occurred in professional and business services sectors, however, which added 36,000 jobs, while private education and health services recorded 69,000. Job gains in construction totaled 11,000, but residential construction payrolls shed 2,900 jobs and hiring among residential specialty trade contractors fell by 5,700 as home builders struggle.

New single-family construction spending fell 0.1% from April to land 4% lower than a year ago in June, according to Census Bureau figures published Wednesday.

“For the Federal Reserve, the report buys time rather than forcing its hand,” added Williamson. “Softer payroll growth and downward revisions take pressure off the tightening case, while the drop in labor force participation modestly strengthens the case for easing.”

Policymakers at the U.S. central bank unanimously voted to hold the federal funds rate unchanged in its target range of 3.5% to 3.75% at their June meeting, though an increasing number projected the Fed’s benchmark interest rate would be higher by year’s end.

Market-implied odds of a Fed rate hike declined on Thursday after the BLS released its June employment report, according to CME FedWatch, which tracks fed funds future pricing.

Odds that Fed officials will hold rates flat at the July policy meeting rose to 80% on Thursday morning from around 71% a day earlier. Meanwhile, odds that a quarter-point hike will occur by the September gathering declined from 50% to 45%.