The US jobs machine experienced a slowdown in June, with the world's largest economy adding just 57,000 jobs, falling short of the 110,000 expected by Wall Street. This marks the first time employment growth has declined since the US-Iran war began, and is the weakest growth since February when payrolls contracted by 155,000.
The unemployment rate, however, defied forecasts by falling to 4.2 per cent from 4.3 per cent. This drop in unemployment suggests that while the jobs market may be slowing, it is not yet experiencing significant contraction.
The disappointment in the jobs report centred around the football World Cup, which kicked off on June 11 in 11 US host cities. Analysts had expected the tournament to boost hiring in hospitality and related sectors, but instead payrolls in food and accommodation fell by 55,000.
Despite the disappointing jobs numbers, the World Cup did bring some economic activity, with host cities seeing a 5 per cent rise in spending at restaurants and bars during the competition. This increase in spending suggests that some businesses are benefiting from the tournament, but the jobs market is not yet reflecting this.
The broader picture of the jobs market is one of deceleration, with the public sector generating 8,000 jobs, down from 32,000 in May, and the private sector adding 49,000, down from 97,000. Jobs growth was strongest in education, professional and business services, social assistance and healthcare.
Revisions to previous months' data showed that jobs growth was slower than previously thought, with the losses concentrated in leisure and hospitality, a pattern familiar to those who have followed the slowdown in the US jobs market over the past year.
Average hourly earnings growth remained unchanged at 0.3 per cent on the month, with the annual rate edging up to 3.5 per cent from 3.4 per cent. This suggests that wages are continuing to grow, but at a slower pace.
The Federal Reserve is now under increased scrutiny, with traders trimming their expectations of two interest rate rises after the data landed. Economists are divided on the implications, with some arguing that the slowdown will push the Fed into leaving borrowing costs unchanged this month.
Markets took the news in their stride, with the dollar declining by 0.6 per cent against a basket of currencies on Thursday, and government bond prices remaining stable. Economists continue to expect the Fed to hold rates steady through to the year-end, but warn that if unemployment continues to fall, the case for additional policy tightening later this year will become increasingly compelling.
