The June jobs report continued a slowing trend with the economy adding 147,000 jobs in the month, compared to an average of 168,000 in 2024. So far this year, job growth has averaged 133,000 jobs a month.

The June numbers were actually considerably weaker than the headline number suggests. State and local government education accounted for 63,500 of the new jobs reported for June. This was almost certainly due to a faulty seasonal adjustment rather than a hiring spree for teachers. This increase is likely to be at least partially reversed in July, if revisions to the June data don’t lower that month’s numbers.

There also has been a modest slowing in wage growth. After increasing at a 4.0 percent annual rate in 2023 and 2024, the average hourly wage increased at just a 3.2 percent annual rate comparing the last three months (April-June) with the prior three months (January-March).

These data are erratic, so the picture could look different with another month of data and revisions to prior months, but slowing nominal wage growth, coupled with the higher inflation due to tariffs, translates into slower real wage growth. This would dampen consumption growth and slow the economy.

Fewer Immigrants Mean Less Job Growth

It is important to recognize that much of the slowing in job growth is by design. The curtailing of immigration, which began last summer under Biden, and accelerated after Trump took office, means there are fewer people entering the workforce. In the absence of large-scale immigration, the rate of job growth needed to keep unemployment steady is in the range of 40,000 to 80,000 a month.

The slower rate of labor force growth means there should be less focus on the overall numbers and more concern about measures of labor market slack, such as the unemployment rate, the employment to population ratio (EPOP), and the rate of wage growth. The EPOP did fall by 0.3 pp in May, a drop that was not reversed in June.

Unemployment Rates for Black Workers and Young People Have Risen

Even as the overall unemployment rate has remained low, the most disadvantaged workers are having a more difficult time getting jobs. The unemployment rate for Black workers rose to 6.8 percent in June, the highest since January of 2022. This is two full percentage points above the 4.8 percent all-time low hit in April of 2023.

The unemployment rate for young workers between the ages of 20-24 has also risen sharply. It bottomed out at 5.5 percent in April of 2023. It stood at 8.2 percent in June. If the labor market weakens somewhat in July, their unemployment rate is likely to edge higher, as will also be the case with Black workers.

The Share of Unemployment Due to Voluntary Quits Will Drop

Many analysts have noted that workers are more reluctant to quit their jobs than is normal, given the relatively low unemployment rate. This was also true in 2023 and 2024, but that was likely due to increased job satisfaction after the massive job shifting in 2021-2022. The more plausible explanation now is fears over labor market prospects.

The share of unemployment due to voluntary quits jumped 2.0 pp to 11.8 percent in June. This is still low given the unemployment rate. The share averaged 13.2 percent in 2018-2019. This share will likely drop in July, reversing part of its June rise, since the June rise was likely in part driven by measurement error.

Job Growth Will Be Well Under 100,000

The extraordinary job growth in state and local government education will be at least partially reversed in July, pulling job growth down. It is also unlikely that that job growth will continue to be as strong in the health care sector. It added 39,200 jobs in July, which was slightly below its average of 43,000 over the prior year.

The looming cutbacks in federal spending, coupled with many state and local governments making cuts to address budget shortfalls, are forcing hospitals and other providers to curtail hiring and may lead to job cuts. As a result, employment growth in the sector will be weakening in July and through the rest of 2024.

Slump in Manufacturing Employment Likely to Continue

Manufacturing lost 7,000 jobs in June, pushing employment 89,000 below the year ago level. Auto manufacturing has been especially hard-hit, losing 26,600 jobs over the last year. The sector is likely to lose jobs again in July as tariffs on key inputs, such as steel and aluminum, push costs higher and slowing wage growth weakens demand.

Construction added 15,000 jobs in June, roughly in line with its average over the prior year. This number will almost certainly be lower in July, if the June number is not revised down. Construction spending has slowed sharply in the winter and spring and this will almost certainly be reflected in employment. The loss of immigrant labor is likely also to be showing up in the data.

Private Education and Research Will Also See Job Hits in July

The Trump administration’s cuts in research spending, coupled with its attacks on colleges and universities, are forcing cutbacks in employment. The number of jobs in scientific research and development fell by 5,700 in June; they are now down by more than 1.0 percent since March. Job growth in the sector had been strong the prior two years.

There is a similar story with the private education category, which is largely employment at colleges and universities. It fell 7,500 in June. It had been creating jobs at the rate of 4,500 a month over the prior year.

Job Growth in Restaurants Likely to Weaken Further

Real spending in restaurants has been largely flat since December. Employment has risen by a modest 5,900 over the last six months. That compares to growth of 11,000 a month in the year to December. Employment in the sector will likely be flat in July.

July Jobs Report Will Provide Further Evidence of a Slowing Labor Market

There clearly is not any sort of collapse of the labor market, which would be apparent in weekly unemployment claims, but we are seeing signs of a weakening labor market. The big items to look to will be wage growth, as well as higher unemployment among vulnerable groups. There also has been a decline in the length of the average work week, which can be a prelude to layoffs. The direction of hours growth is another important item to watch.