A day after private sector jobs fall, the overall market adds more jobs than expected, showing resilience
After Wednesday’s private-sector jobs report came in weaker than expected, many experts believed today’s overall jobs report would do the same. Instead, the job market added more positions than expected in June, with unemployment dropping slightly as well.
The U.S. labor market maintained steady growth in June, adding 147,000 jobs, according to the latest report from the Bureau of Labor Statistics released Thursday. The unemployment rate dipped slightly to 4.1%, continuing a narrow range that has held since spring.
Sam Williamson, senior economist at First American, said the market provided some welcome good news before the holiday weekend. However, he said the news would likely signal more waiting from the Federal Reserve.
“The U.S. labor market offered a pre-Fourth of July surprise, generating 147,000 jobs, nearly 40,000 more jobs than consensus estimates expected, and demonstrating continued resilience," Williamson said. "While the June pop in jobs, combined with upward revisions to March and April reports, signal hiring has stabilized following a sluggish start to 2025, it means July will be a dud, with a Fed rate cut unlikely and dropping the odds for a move in September.
“The housing market has been waiting for a Fed rate-cutting cycle to light the fuse on the 2025 home-buying season, but the labor market’s surprising resilience has extinguished some of that optimism for now.”
Following the report, traders reduced expectations for a near-term interest rate cut by the Federal Reserve. Markets now see just a 6.7% chance of a rate cut at the July meeting, down from 24% the day before, according to the CME FedWatch.
Mike Fratantoni, SVP and chief economist at Mortgage Bankers Association (MBA), indicates that despite headwinds, the job market continues to stay steady.
“Taken together, these data indicate a job market that is holding up reasonably well given the uncertainties facing this economy,” Fratantoni said. “While there are certainly some signs of softening in the private sector, the report is likely to keep the Federal Reserve on hold for now. MBA is still forecasting two cuts from the Fed this year.”
June’s job gains exceeded economists’ expectations, who had predicted about 106,000 new roles and a rise in the unemployment rate. This marked an increase from May’s revised addition of 144,000 jobs. So far in 2025, monthly job growth has averaged 124,000 positions. This is lower than the strong gains of 2021 through 2023 but still signals a resilient labor market.
“Potential homebuyers are likely to remain cautious unless, and until, the job market begins to improve again, or mortgage rates drop sufficiently to spur more activity,” Fratantoni said.
State and health care sectors drive gains
Hiring was especially strong in state governments and healthcare. Government payrolls increased by 73,000, with state government education alone accounting for 40,000 new jobs. Local government education roles also continued to trend higher, adding 23,000 positions.
“Job growth came in at 147,000 in June, in line with the average pace for the last 12 months,” Fratantoni noted. “However, half of these job gains were in state and local government, leaving private sector job gains at 74,000, at half their pace of recent months. Looking within the private sector, effectively all these new jobs were in education, health care, and hospitality. Recent data also show that job openings are up in these sectors.
“The unemployment rate dropped back to 4.1%, but this was the result of more individuals leaving the labor force rather than gaining employment, as the labor force participation rate dropped again.”
Meanwhile, federal employment fell by 7,000 as Washington continues to feel the effects of staffing freezes and voluntary departures.
Healthcare added 39,000 jobs in June, supported by growth in hospitals and in nursing and residential care facilities. Social assistance roles increased by 19,000, with individual and family services experiencing continued growth.
Other major sectors, including manufacturing, construction, retail, and leisure and hospitality, showed little change last month. Many businesses are proceeding cautiously as they manage policy uncertainty and higher borrowing costs. Overall, the strong gains in public employment and health services helped offset slower growth in other parts of the economy.
Uncertainty still remains
Average hourly earnings for private-sector workers rose by 0.2% in June, reaching $36.30, and were up 3.7% over the past year. The average workweek for private nonfarm employees edged down slightly to 34.2 hours.
Private-sector hiring trends remain mixed. ADP reported that private employers cut 33,000 jobs in June.
Small businesses disproportionately faced job losses in June, while larger firms continued to expand payrolls. ADP's Dr. Nela Richardson notes a hesitancy to hire, though pay growth remains resilient for many.https://t.co/gTLijO56gE
— Mortgage Professional America Magazine (@MPAMagazineUS) July 2, 2025
"Though layoffs continue to be rare, a hesitancy to hire and a reluctance to replace departing workers led to job losses last month," said ADP chief economist Nela Richardson.
Uncertainty related to President Donald Trump’s tariff policies and federal workforce shifts has contributed to employer caution. Manufacturers have expressed reluctance to make decisions without clearer guidance on tariffs. "That whiplash has to stop and it has to stay stopped," said Susan Spence, chair of the Institute for Supply Management’s manufacturing survey committee
Nancy Vanden Houten, lead U.S. economist at Oxford Economics, told the Associated Press that federal job reductions likely reflect "a hiring freeze, voluntary quits and retirements." She added that court rulings "have put massive federal layoffs on hold" for now.
Meanwhile, the number of long-term unemployed increased by 190,000 to 1.6 million in June, making up 23.3% of all unemployed individuals. The labor force participation rate held steady at 62.3%, and the number of people working part-time for economic reasons remained at 4.5 million.
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