After a series of several better-than-expected jobs reports over the spring months, job market growth in June 2026 hit a wall, adding a modest 57,000 jobs – concentrated in healthcare again. Downward revisions to April and May’s reports subtracted 77,000 net jobs, dragging down three-month, non-farm payroll growth to 111,000. Still a healthy figure, but a step below the recent pace of hiring.
Outside of healthcare, professional and business services was the other main driver of growth for the month, a sector that has experienced enduring weakness due to elevated interest rates and a generational technology shock. Most other sectors were flat or slightly down.
The largest surprise in this report is a decline of 61,000 jobs in leisure and hospitality, an industry that has been doing fairly well the past few months during the World Cup in the U.S.
In May’s report, several analysts correlated the jump in hospitality jobs with soccer frenzy – but I had my doubts: year-over-year, the unseasonally-adjusted change in the sector was effectively the same, implying very little growth in hiring due to the event.
The other large negative surprise in today’s report is the sharp drop in the prime-age labor force participation rate, declining 0.6 percentage points in a single month. In fact, excluding the large drop during the peak of the pandemic, this was the single largest decline in the series in the 21st century. Most of the decline was concentrated in the 25–34-year-old group, so this shift may just be noise – but it’s a large enough of a drop to warrant further inspection.
This is a clear warning sign that despite the recently hot job growth, there are underlying issues with the labor force that need careful watching from the Fed, as their attention has fully shifted to inflation (rightfully so).
The big picture takeaway: The labor market is not a source of inflationary pressure for the Fed to worry about. The most recent Fed meeting clearly showed their priorities are shifted towards tamping inflation, even if that requires raising rates soon. Wage growth has continued to ease, now at 3.4% over the year for non-managerial workers.
Yet, at the same time, the job market is not without concern, too. Yes, the unemployment rate is still low at 4.2% and the pace of hiring is above breakeven (concentrated in a single sector) but policymakers should be careful not to completely ignore the state of the labor market going forward.
About Sam Kuhn
Sam Kuhn is an economist at Appcast. He primarily researches and writes about long-term trends within the labor market and how macroeconomic forces change these patterns.