The economy added 57,000 jobs in June, once again led by growth in the health care and social assistance sector, which added 46,600 jobs. The unemployment rate ticked down to 4.2 percent, but the employment-to-population ratio (EPOP) also fell, dropping 0.2 to 59.0 percent, its lowest level since June of 2021.

The job growth figures for the prior two months were both revised down by a total of 74,000. This brings the average gain for the last three months to 111,000, which is closer to — but likely still above — the breakeven pace of employment growth.

Drop in EPOP Driven by Sharp Fall in EPOP for Prime-Age Men

The decline in the EPOP in June was driven largely by a drop of 0.9 percentage points (p.p.) in the EPOP for prime-age men (ages 25-54) to 85.7 percent, the lowest level since June of 2022. This sort of one-month drop is extraordinary. The monthly data are erratic, but a reported decline of this size almost certainly reflects something real in the labor market.

There was also a smaller 0.3 p.p. drop in the EPOP for prime-age women to 74.9 percent. The overall EPOP for prime-age workers fell 0.6 p.p. to 80.2 percent, the lowest since December of 2022.

This sharp drop in EPOPs for prime-age workers is somewhat surprising. Last year we were seeing a deterioration in the prospects for groups that were disadvantaged in the labor market, like young and Black workers. The sharp June drop in EPOPs reverses this story. Interestingly, the decline is almost all due to lower labor force participation; the unemployment rate for prime-age workers declined  0.1 p.p. to 3.7 percent, although it did rise 0.2 p.p. for men to 3.9 percent, the highest since October of 2021.

Unemployment Duration Measures Fall, as Does Unemployment Due to Quits

The duration measures of unemployment all improved in June, partially reversing a deterioration shown in the May data. The average duration fell to 25.5 weeks, from 26.0 weeks in May, but still above the 24.4 weeks in April. The median duration fell from 11.6 weeks to 11.0 weeks, the same as the April level. These data are erratic, but at least there is no upward trend for duration.

The share of unemployment due to quits fell from 12.5 percent to 11.0 percent. This is low for an unemployment rate of 4.2 percent, suggesting workers are not confident enough in their job prospects to quit one job without another one lined up.

Unemployment for Native-Born Workers Up 0.2 PP to 4.6 Percent

The unemployment rate for native-born workers in June was 0.2 p.p. above its year-ago level. The data are not seasonally adjusted, so we can’t make monthly comparisons. The 4.6 percent percent rate is 0.7 p.p. above the 3.9 percent rate in June of 2023.

Wage Growth Remains Weak

The average hourly wage has increased 3.5 percent over the last year. This is down from a pace of roughly 4.0 percent in 2023 and 2024, presumably reflecting a weaker labor market. The 3.5 percent rate is not keeping pace with recent inflation, although that story is likely to improve with the declines in gas prices in June. In any case, there is a notable slowing in wage growth, even as inflation has accelerated.

Women Workers Account for All the Payroll Job Growth, Now 50.1 Percent of Total Employment

Employers added 101,000 women to their payrolls last month, accounting for more than all the growth in employment. Over the last three months the average gain in women workers has been 90,000, accounting for the overwhelming majority of the increase in payroll employment. Women now account for just under 50.1 percent of payroll employment, the highest level ever.

Health Care and Social Assistance Accounted For 124 Percent of the Job Growth Over the Last Year

The disproportionate share of job growth in the health care and social assistance sector is continuing the pattern we have seen for more than a year. The net job growth outside of these sectors is close to zero. With an aging population this pattern is perhaps not surprising, but it is nonetheless striking. Most of the social assistance jobs are home health care workers.

Hotel and Restaurant Sectors Both Shed Jobs in June

The hotel sector lost 21.7K jobs in June, while restaurants lost 32.9K jobs. The growth figures for earlier months were also revised down. This is somewhat of a surprise, since the World Cup was expected to boost growth in these sectors. On the other hand, the rise in the number of restaurant jobs had been somewhat peculiar, with employment increasing 128K (1.0 percent) over the last year, even though real sales have been flat.

Employment in local governments, which had risen 33,000 in May, rose just 2,000 in June. It is up by 90,000 over the last year.

Insurance and Motion Picture Industries Lose Jobs

The insurance industry lost another 1.9k jobs in June, continuing a downward path that began last November. This is one sector where AI may be having a visible impact on employment. Jobs are now down by 63.4K since October, a drop of 2.1 percent.

Jobs in the motion picture sector continued their downward trend, falling by 3.6K. Employment in the sector is down 29.5 percent from the peak in November of 2022.

Overall, A Mixed Picture in June

The economic picture for June is somewhat confusing. The growth in jobs in the establishment survey is fine, even if it is somewhat less than most analysts had expected. It is certainly fast enough to keep pace with the growth in the labor force in the context of near zero immigration. On the other hand, the continuing concentration of job growth in the health care and social assistance sector does not suggest a strong economy. Also, wage growth remains weak.

The household data provide more cause for concern. While the modest decline in the unemployment rate is a positive, the sharp fall in prime-age EPOPs, especially for men, is troubling. As noted, the data are erratic and the true fall was almost certainly less than the June data show, but some of the decline was almost certainly real.

The June data also diminish concerns that college-educated workers were doing unusually poorly in the labor market. Their unemployment rate stood at 2.7 percent, down from 3.0 percent in February.

Finally, we are seeing zero evidence of an AI-induced jobs apocalypse. The index of aggregate hours grew at a 1.3 percent rate in the second quarter. With GDP growth likely coming in at close to 2.5 percent, this implies productivity growth of close to 1.0 percent, which would be the third consecutive quarter of weak growth.