Weak Jobs Report Could Renew Debate Over U.S. Labour Market

• A weaker-than-expected June jobs report could renew debate at the U.S. Federal Reserve (Fed) over how to assess the labour market at a time when the number of people available to work may also be declining due to an ageing population and tighter immigration policies.
• U.S. employers added 57,000 jobs in June, while job gains for April and May were revised down by a combined 74,000. Although the unemployment rate edged down to 4.2% from 4.3%, the decline was largely driven by 213,000 fewer people reporting themselves as unemployed, not stronger hiring. Instead, the number of people reporting they had jobs fell by around half a million, as many left the labour force altogether.
• The labour force decreased by about 700,000 in June and has declined by about 1.3 million since President Donald Trump returned to office. Around 1.5 million fewer people were employed in June than in January 2025, raising concerns that a shrinking workforce could weigh on future economic growth despite productivity gains.
• The weaker labour market data comes as the Fed continues to balance persistent inflation against the risk of slower growth. According to San Francisco Fed President Mary Daly, uncertainty over whether inflation or weaker growth poses the greater risk supports waiting before making further interest rate decisions. Following the report, financial markets pared expectations for additional Fed rate hikes.
• If history proves an accurate guide, June's weaker-than-expected first look ​could well be revised sharply lower in the reports for July and August. Policymakers are also assessing whether stronger productivity growth, supported by artificial intelligence, can offset a shrinking workforce and flat hours worked.

(Source: Reuters)