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Dow Jones NewsJul 3, 4:09 PM UTC
MW The June jobs report is grimy under the hood. Here's the down and dirty.
By Jeffry Bartash
Jobs are harder to find, so fewer people are looking for work
The economy created a seemingly healthy 147,000 new jobs in June and the unemployment rate fell to a four-month low. Great news, right? Not if you look under the hood.
A close look at the June employment report suggests the labor market actually deteriorated last month. Fewer companies were hiring and more people stopped looking for work because jobs were harder to find.
"The June jobs report suggests the underlying trend in the economy was very tepid in June and in the second quarter," said Bill Adams, chief economist of Comerica.
Let's start with the headline increase in jobs.
Of the 147,000 new jobs created, half were in state and local government. The private sector added the fewest new workers in eight months. Not good.
The rise in state and local hiring was also a mirage.
Since fewer school employees than usual became unemployed last month, the government's seasonal-adjustment process made it seem like there was a big increase in education jobs.
There wasn't. In fact, the actual or unadjusted number of state and local jobs fell last month. That's what usually happens at the end of the school year.
The private sector, meanwhile, added a meager 74,000 jobs in June, marking the smallest gain in eight months.
That's bad enough. Even worse, almost all the new jobs were created in just one part of the economy: healthcare. Hardly any other industry was hiring.
What about the decline in the unemployment rate? It fell a tick to 4.1%.
The real reason was that some 329,000 people dropped out of the labor force, with many of them saying they were too discouraged by how hard it was to find a job.
This is an ongoing trend in 2025.
The so-called participation rate fell in June to a 21/2-year low of 62.3%, down from a postpandemic peak of 62.8% two years ago. This rate tells us what share of people of working age either have a job or are looking for one.
Don't look for participation to improve, either. For good or ill, the Trump administration's crackdown on immigration has squeezed the supply of labor.
Another sign of weakness: Companies are no longer giving big pay raises each year since leverage in the labor market has shifted to employers from employees.
The increase in worker pay in the past year slowed to 3.7% in June, just a hair above the prepandemic peak.
A few years ago, companies were so desperate to hire in an era of chronic labor shortages that wages grew as fast as 6% a year.
Those days are over.
"Although the overall number of jobs was very strong, the weakness was broad-based across the private sector," said chief economist Eugenio Aleman of Raymond James. "The labor market continued to weaken in June."
-Jeffry Bartash
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07-03-25 1209ET
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