U.S. Payrolls Beat Forecasts, Easing Rate Cut Pressure as Labor Market Holds Firm

U.S. Payrolls Beat Expectations as Labor Market Holds Firm

U.S. job growth came in stronger than expected in June, reinforcing market confidence in the labor market’s resilience despite ongoing calls for interest rate cuts. The Bureau of Labor Statistics reported Thursday that nonfarm payrolls increased by 147,000, surpassing estimates for a 110,000 rise and supporting risk appetite across equities.

Unemployment Rate Dips to 4.1% as Participation Holds

The unemployment rate fell to 4.1%, better than the expected 4.3% increase, underscoring continued tightness in labor conditions.

Average hourly earnings rose 0.2% month-over-month and 3.7% year-over-year, indicating that wage growth remains steady without triggering immediate inflation concerns.

This mix of steady wage gains and moderate employment growth may give the Federal Reserve space to maintain its current policy path while monitoring inflation softness.

Government Hiring Leads Payroll Gains

Government employment led sector gains with an increase of 73,000 jobs, driven by solid state and local hiring, particularly in education roles. This sector strength came despite federal government employment dropping by 7,000, reflecting the ongoing impact of budget reductions under the Department of Government Efficiency. The public hiring surge adds a stabilizing component to the labor market, helping offset soft patches in manufacturing and construction.

Health Care and Social Assistance Remain Strong

Health care continued its robust expansion, adding 39,000 jobs in June, while social assistance contributed 19,000 to the total payroll gain. These areas remain critical drivers of U.S. employment growth, reflecting structural demand resilience that supports consumer spending and service-sector stability. For traders, this ongoing sectoral strength indicates a solid floor under labor demand, helping sustain domestic consumption.

Market Forecast: Bullish Bias for Equities, Yields Supported

Following the report, U.S. stock futures maintained their gains while Treasury yields moved higher, signaling a bullish tilt in risk assets with the labor market’s support. The stronger-than-expected payroll data reduces the urgency for aggressive rate cuts from the Federal Reserve while confirming a steady economic backdrop for equities. Unless inflation data surprises to the upside, traders can expect risk assets to find near-term support, with yields remaining elevated as the market adjusts to a resilient labor market narrative.