Fed case for lower rates still murky as job market comes in strong in June

Hiring in the US remained steady but slowed slightly in June, with nonfarm payrolls increasing by 147,000 and the unemployment rate holding near recent levels at 4.1%, according to data released Wednesday by the Bureau of Labor Statistics.

The latest numbers suggest a labor market that is continuing to expand at a modest pace, roughly in line with its average monthly gain of 146,000 over the past year.

However, the update from the BLS also points to ongoing weakness in federal government employment, which declined by 7,000 jobs in June and has dropped 69,000 since reaching a peak in January.

State and local governments were the primary drivers of public-sector hiring, with state government payrolls growing by 47,000 in June, mostly in education. Local government education added another 23,000 jobs. These gains helped offset federal job losses and contributed to a total public-sector increase of 73,000 positions.

Health care also added jobs, continuing a trend of steady expansion in that sector, though the BLS release did not specify totals for June. Outside these areas, private-sector job growth appeared to decelerate.

The BLS also revised its employment figures for April and May, adding a combined 16,000 jobs to earlier estimates. April's total was adjusted from 147,000 to 158,000, and May's was revised from 139,000 to 144,000.

The June numbers come on the heels of a weaker-than-expected private payroll report from ADP, which showed a decline of 33,000 private-sector jobs last month – the first contraction in more than two years. That figure, released Wednesday, raised concerns among some market watchers about the underlying strength of the labor market.

The unemployment rate has remained within a narrow band of 4.0% to 4.2% since May, indicating little recent movement in overall labor market slack. The number of unemployed people in June was 7 million, essentially unchanged from the previous month.

Taken together, the data offer yet another set of mixed signals to Federal Reserve officials, who are weighing conflicting pressures from slowing job growth, slowing but still above-target inflation, and the effects of new tariffs on consumer prices.

Fed Chair Jerome Powell said earlier this week that inflation tied to tariffs may become more visible over the summer but acknowledged uncertainty about how and when those effects might materialize.

“We expect to see over the summer some higher readings,” Powell said Tuesday during a panel discussion with other central bankers hosted by Bloomberg. “We think that the prudent thing to do is to wait and learn more and see what those effects might be.”

Inflation has been tracking lower than forecast in recent months. Core CPI, which excludes food and energy, rose 0.1% in May and 2.8% from a year earlier, according to prior BLS data. Those figures supported the Fed’s decision to keep rates on hold this year, despite pressure to cut from the White House.

In the latest episode, President Donald Trump called for Powell's resignation in a social media post Wednesday morning before the June jobs data came to light.

“‘Too Late’ should resign immediately!!!” Trump, who has repeatedly called on the Fed to lower interest rates immediately, wrote on his Truth Social platform.

The next inflation report from the BLS, featuring the June reading for the consumer price index, is set to come out on July 15.