Nonfarm payrolls are up 147,000 in June with a small net upward revision of 16,000 in the prior two months. The June increase is above the consensus of 110,000 in the Econoday survey of forecasters. However, the apparent strength of hiring is largely from gains of 40,300 in state government education and 33,000 in local government education which boosted government hiring by 73,000. Private sector hiring is up 74,000 in June with a gain of 6,000 among goods-producers and 68,000 among service-providers. Private sector services are higher mostly from hiring 39,200 workers in health care. Despite the strong headline increase, payrolls rose substantially in only a few narrow sectors that are unlikely to be repeated in the coming months.

For the second quarter 2025, the monthly gain in payrolls averages 150,000, above 111,000 in the first quarter while massive layoffs in government were taking place but below 209,000 in the fourth quarter 2024.

Average hourly earnings are up 0.2 percent in June from May and up 3.7 percent from June 2024. The year-over-year rise is the slowest since up 3.6 percent in June 2024.

The unemployment rate dips one-tenth to 4.1 percent in June. The consensus in the Econoday survey is for 4.3 percent. However, the June reading is mostly from a decrease in the size of the labor force that may reflect a withdrawal from the labor market by some workers. The U-6 rate the broadest measure of unemployment is also down a tenth to 7.7 percent in June. Workers on the margins may be more discouraged about the possibility of finding work and leaving the hunt for a job. The participation rate is down a tenth to 62.3 percent.

The size of the labor force is down 130,000 to 170.4 million in June with the number of employed up 93,000 to 163.4 million and unemployment down 222,000 to 7.0 million.

It is not clear if the June decrease of 159,000 to 4.5 million in the number of people working part-time for economic reasons is good or bad. If workers are moving to full-time employment or workers no longer needing a second part-time job, this could be a good sign. On the other hand, if these are cuts in part-time jobs that result in an involuntary job loss, many workers ineligible for jobless benefits could be looking for work. However, job losers are down 164,000 to 3.3 million. In June, job leavers are up 121,000 to 825,000 in June which suggests that workers are still voluntarily changing jobs.

On balance, it is a mixed picture for the monthly report that points to uncertain conditions in the labor market. The FOMC will not get the July employment report before its next meeting on July 29-30. Fed policymakers will have to parse the other incoming numbers to determine if this report is consistent with weakening hiring but no significant job losses.

Nonfarm jobs expected up 110K and the jobless rate at 4.3 percent for June versus 139K and 4.2 percent in May. After the surprising 33K drop in the ADP private payrolls report, some forecasts have been revised down. Slowdown alert.

The most closely watched of all economic indicators, the employment situation is a set of monthly labor market indicators based on two separate reports: the establishment survey which tracks 650,000 worksites and offers the nonfarm payroll and average hourly earnings headlines and the household survey which interviews 60,000 households and generates the unemployment rate.

Nonfarm payrolls track the number of part-time and full-time employees in both business and government. Average hourly earnings track employee pay while the average workweek, also part of the establishment survey, tracks the number of hours worked. The report's private payroll measure excludes government workers.

The unemployment rate measures the number of unemployed as a percentage of the labor force. In order to be counted as unemployed, one must be actively looking for work. Other commonly known data from the household survey include the labor supply and discouraged workers.

If ever there was an economic report that can move the markets, this is it! The anticipation on Wall Street each month is palpable, the reactions can be dramatic, and the information for investors is invaluable. By digging just a little deeper than the headline unemployment rate, investors can take more strategic control of their portfolio and even take advantage of unique investment opportunities that often arise in the days surrounding this report.

The employment data give the most comprehensive report on how many people are looking for jobs, how many have them, what they're getting paid and how many hours they are working. These numbers are the best way to gauge the current state as well as the future direction of the economy. Nonfarm payrolls are categorized by sectors. This sector data can go a long way in helping investors determine in which economic sectors they intend to invest.

The employment statistics also provide insight on wage trends, and wage inflation is high on the list of opponents of easy monetary policy. Fed officials constantly monitor this data watching for even the smallest signs of potential inflationary pressures, even when economic conditions are soggy. If inflation is under control, it is easier for the Fed to maintain a more accommodative monetary policy. If inflation is a problem, the Fed is limited in providing economic stimulus.

By tracking the jobs data, investors can sense the degree of tightness in the job market. If wage inflation threatens, it's a good bet that interest rates will rise; bond and stock prices will fall. No doubt that the only investors in a good mood will be the ones who watched the employment report and adjusted their portfolios to anticipate these events. In contrast, when job growth is slow or negative, then interest rates are likely to decline - boosting up bond and stock prices in the process.


Importance
The employment situation is the primary monthly indicator of aggregate economic activity because it encompasses all major sectors of the economy. It is comprehensive and available early in the month. Many other economic indicators are dependent upon its information. It not only reveals information about the labor market, but about income and production as well. In short, it provides clues about other economic indicators reported for the month and plays a big role in influencing financial market psychology during the month. Additionally, the Fed has made 6.5 percent unemployment a threshold for considering changes in policy - both for quantitative easing and the fed funds rate. And the Fed has emphasized that it is overall labor market conditions that matter - not just a specific number.

Interpretation
The bond market will rally (fall) when the employment situation shows weakness (strength). The equity market often rallies with the bond market on weak data because low interest rates are good for stocks. But sometimes the two markets move in opposite directions. After all, a healthy labor market should be favorable for the stock market because it supports economic growth and corporate profits. At the same time, bond traders are more concerned about the potential for inflationary pressures.

The unemployment rate rises during cyclical downturns and falls during periods of rapid economic growth. A rising unemployment rate is associated with a weak or contracting economy and declining interest rates. Conversely, a decreasing unemployment rate is associated with an expanding economy and potentially rising interest rates. The fear is that wages will accelerate if the unemployment rate becomes too low and workers are hard to find.

Nonfarm payroll employment indicates the current level of economic activity. Increases in nonfarm payrolls translate into earnings that workers will spend on goods and services in the economy. The greater the increase in employment, the faster is the total economic growth. When the economy is in the mature phase of an expansion, rapid increases in employment cause fears of inflationary pressures if rapid demand for goods and services cannot be met by current production.

When the average workweek trends up, it supports production gains in the current period and portends additional employment increases. When the average workweek is in a declining mode, it probably is signaling a potential slowdown in employment growth-or even outright declines in employment in case of recession.

Gains in average hourly earnings represent wage pressures. It is worth noting that these figures aren't adjusted for overtime pay or shifts in the composition of the workforce, which affects wages on its own. Market participants believe that a rising trend in hourly earnings will lead to higher inflation. But if increased wages are matched by productivity gains, producers likely will not increase product prices with wages because their unit labor costs are stable.