US labor market shows some cracks
In June, US non-farm payrolls rose by a surprisingly strong 147,000. However, half of this increase was attributable to the public sector.
Commerzbank Economic Research
07/03/2025
The data ...
In June, job growth in the US was 147,000. This is above expectations (consensus 106,000, Commerzbank 110,000). Revisions to data for prior months added a further 16,000. The unemployment rate fell from 4.2% to 4.1%, contrary to expectations of a slight increase to 4.3%. Average hourly earnings rose by only 0.2% from the previous month, thus slowing down again slightly. Compared with the previous year, wages rose by 3.7% after 3.8% in May (revised down from 3.9%).
... and the background
At first glance, the increase in employment in June is a positive surprise. The feared slowdown is not evident here (Chart 1). However, 73,000 of the new jobs were in the public sector, particularly in state and local government education. This unusually high increase is more likely to be due to problems in adjusting for seasonal or calendar effects such as shifts in school holidays or similar technical factors. A counter-movement is to be expected here in July. It is important to note that the private sector created only 74,000 jobs. Furthermore, only a few sectors are contributing to private job creation. Almost all new jobs in the private sector are in private education and healthcare, as well as in leisure and hospitality. In more cyclical sectors such as manufacturing and business services, however, the number of jobs is stagnating or declining. Those who had a job also worked fewer hours on average. All of this clearly shows how the economy has lost momentum.
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