US job growth slows sharply, easing rate hike fears
US employers added just 57,000 jobs in June, missing forecasts and weakening real wages, while Wall Street rallied on hopes the Federal Reserve will hold rates steady.
US employers added just 57,000 jobs in June, roughly half the 110,000 consensus forecast, signaling a sudden slowdown in labor market momentum. The Bureau of Labor Statistics also revised April and May figures down by a combined 74,000. The unemployment rate ticked down to 4.2% from 4.3%, but this masked underlying weakness as 720,000 people dropped out of the labor force, pushing participation down to 61.5%.
The hospitality sector drove the overall weakness, shedding 61,000 jobs as seasonal hiring failed to materialize around the World Cup and Independence Day. Economists attribute the pullback to elevated motor fuel prices stemming from the Iran war, which has squeezed discretionary spending on dining out. Excluding healthcare and social assistance, which accounted for 47,000 of the monthly gains, cyclical job growth was essentially flat at 2,000.
Compensation is failing to keep up with the cost of living for American workers. Average hourly earnings rose 3.5% year-over-year, trailing the 4.2% inflation rate recorded in May and leaving households poorer in real terms. However, this wage moderation is precisely what equity investors wanted to see.
Wall Street opened higher on the data, with the Dow Jones Industrial Average gaining 0.5% to 52,578 points and the S&P 500 rising 0.4%. Investors interpreted the hiring slowdown as evidence that existing interest rates are sufficiently cooling the economy. “The US labour market has lost more momentum than expected, reigniting sparks of hope that the Federal Reserve will stay on the sidelines and put off rate hikes this year,” said Susannah Streeter, chief investment strategist at Wealth Club.
UK motor finance payouts paused
Across the Atlantic, a UK compensation scheme for mis-sold motor finance loans has been partially suspended ahead of a legal challenge. The Financial Conduct Authority said an Upper Tribunal order prevents lenders from calculating or paying redress until the litigation concludes. Borrowers had been expected to receive an average of £830 each for undisclosed commission arrangements between dealers and lenders between 2007 and 2024.
The legal challenges were brought by ConsumerVoice, Volkswagen Financial Services, Mercedes-Benz Financial Services, and Crédit Agricole Auto Finance. A hearing is scheduled for either December 2026 or February 2027. Lenders must still identify relevant complaints and gather data, but are no longer required to communicate compensation decisions to consumers who are not owed money.
