US payrolls undershoot forecasts by wide margin on revisions

Hiring and wage growth in the US eased as expected last month, but after a much faster-than-expected slowdown over the previous two months.

According to the Department of Labor, non-farm payrolls grew by 206,000 by in June.

Consensus had been for an increase of 190,000.

Average hourly earnings meanwhile were up by 0.3% month-on-month (consensus: 0.3%) and 3.9% year-on-year. The latter was the lowest reading since the second quarter of 2021.

Significantly, readings on non-farm payrolls for the prior two months were revised down by a combined 111,000.

The three-month moving average for total payrolls growth declined from 212,000 to 177,000 and from 178,000 to 146,000 within the private sector.

In parallel, the unemployment rate ticked higher by a tenth of a percentage point to 4.1% (consensus: 4.0%).

The labour force kept growing, by 277,000 this time around, and the labour force participation rate increased by one tenth of a percentage point to 62,6%.

Immediately following the release of the latest numbers the yield on the benchmark 10 -year US Treasury note fell to 4.284%, but as of 1342 BST was lower by five basis points to 4.319%.

The odds of a first 25 basis point interest rate cut by the Fed at the 18 September meeting were being put at 75.8%, little changed on the day before.

By sectors, hiring in private sector services ran at 117,000 in June, mimicking April's similarly less robust reading of 111,000, perhaps as flagged by purchasing managers' surveys over the past few months.

Payroll growth in Leisure and Hospitality was also soft, rising by 7,000, but offset by a large 70,000 person rise in Government and another 82,400 in Health Care and Social Assistance.

Commenting on the latest jobs figures, Paul Ashworth, chief North America economist at Capital Economics, highlighted, among other features, the "massive" 48,900 drop in temporary help employment.

He also noted that the big gains in non-education state and local government were hard to square with anecdotal evidence of budget falls that had forced many states to rein in outlays.

-- More to follow --