US job growth outpaced expectations in June, signaling continued strength in the labor market and diminishing the likelihood of an interest rate cut by the Federal Reserve later this month.
The Labor Department reported Thursday that the US economy added 147,000 jobs in June, beating the 110,000 gain forecast by economists surveyed by the Wall Street Journal.
The unemployment rate dipped to 4.1%, down from 4.2% in May.
“Today’s jobs report was much better than expected, especially coming on the heels of a disappointing ADP employment report yesterday,” said Chris Zaccarelli, chief investment officer for Northlight Asset Management in Charlotte, NC.
“Given the strong jobs numbers along with the extension of tax cuts and potentially higher tariff levels (once the 90-day pause expires), the Fed is much less likely to cut rates this month than many were talking about earlier this week,” Zaccarelli said.
He added that instead of cutting in July, “the Fed is likely to wait until later in this quarter or even until the fourth quarter before they cut interest rates.”
Revisions to prior months also showed stronger hiring than previously reported. April and May job gains were revised upward by a combined 16,000 jobs.
Stocks rose following the report, with the Dow, S&P 500 and Nasdaq all showing gains in early morning trading.
As of 9:33 a.m. EDT, the Dow was up 121 points (+0.27%), the S&P rose 27.36 points (+0.44%) and the tech-heavy Nasdaq index increased by 123.65 points (+0.61%).
Treasury yields also climbed, and the dollar strengthened.
One area of concern in the report was the continued decline in the immigrant workforce, which shrank for a third straight month.
In contrast, the unemployment rate fell.
President Trump has been vocally critical of Fed Chair Jerome Powell, whom he has given the moniker “too late” over what is perceived as his cautious approach to slashing interest rates.
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Trump also criticized the broader Fed board, insisting rates should already be 2 to 3 points lower and calling current policy politically motivated.
According to the government’s jobs report issued Thursday, health care remained a strong contributor to job growth, consistent with its historic resilience across economic cycles.
State and local governments also boosted hiring, helping offset a decline of 7,000 jobs in federal government employment. In total, government employment rose by 73,000 jobs.
The unexpected strength of the report is expected to influence the Federal Reserve’s next move on interest rates.
Many analysts had speculated that the central bank could move toward a rate cut at its July meeting, but the data may delay any such action.
With the Fed potentially on hold, Zaccarelli noted that investor focus is likely to shift away from macroeconomic concerns and toward the upcoming earnings season.
“The stock market is likely to ignore the greater macroeconomic picture in the short run and focus much more on corporate earnings, which will kickoff in less than two weeks (e.g. on 7/15),” he said.
Zaccarelli also raised a note of caution about stock valuations.
“We have been encouraged by the rapid recovery of the stock market these past 3 months,” he said, “but are concerned that valuations are high.”
Zaccarelli noted that valuations, or the price-to-earnings ratios of the stock market, are currently 22 times earnings, which is significantly higher than the 30-year average of 17 times earnings.
He added that another negative sign for the markets is that “a lot of the good news” such as tax cuts, deregulation and lower-than-feared tariff levels “is already priced in, so the market is much more vulnerable to negative surprises at this point.”
White House Press Secretary Karoline Leavitt touted the strong jobs numbers on Thursday, writing on X: “For the FOURTH month in a row, jobs numbers have beat market expectations with nearly 150,000 good jobs created in June.”
“American-born workers have accounted for ALL of the job gains since President Trump took office and wages continue to rise. The economy is BOOMING again and it will only get better when the One, Big Beautiful Bill is passed and implemented!”
The Fed declined to comment.
