US Jobs Report Preview: June Payroll Growth Seen Slowing as Fed Rate Decision Looms

The U.S. labor market is expected to remain resilient in June, although hiring likely slowed from the strong pace recorded over the previous three months. Economists forecast that the upcoming nonfarm payrolls report will show steady employment conditions, reinforcing expectations that the Federal Reserve could still consider raising interest rates at its September meeting as inflation pressures remain elevated.

According to a Reuters survey of economists, nonfarm payrolls are projected to increase by 110,000 jobs in June after climbing by 172,000 in May. Forecasts vary widely, ranging from 25,000 to 200,000 new jobs, highlighting uncertainty over the strength of hiring. The Labor Department will release the employment report on Thursday, one day earlier than usual because of the U.S. Independence Day holiday celebrations marking the nation’s 250th anniversary.

The unemployment rate is expected to remain unchanged at 4.3% for a fourth consecutive month, signaling a labor market that continues to show stability despite slower hiring. Analysts estimate that the U.S. economy now needs to generate only between zero and 50,000 jobs each month to keep pace with growth in the working-age population. That break-even threshold has declined as tighter immigration policies have reduced labor force growth.

Economists say the labor market has entered what many describe as a "no hire, no fire" phase, where companies are reluctant to expand payrolls aggressively but are equally hesitant to lay off workers. Businesses continue to hold onto employees after experiencing widespread labor shortages following the COVID-19 pandemic.

Recent payroll figures have consistently surprised to the upside. The economy added 214,000 jobs in March and 179,000 in April, lifting the three-month average through May to 188,000 jobs per month, significantly higher than the average of 63,000 recorded during the same period in 2025. Analysts attribute much of the improvement to historically low layoffs rather than a surge in new hiring.

Despite ongoing uncertainty caused by tariffs last year and the more recent conflict involving Iran, employers have largely avoided workforce reductions. The subsequent ceasefire between the United States and Iran has eased concerns over rising energy prices after oil retreated to levels seen before the conflict, reducing downside risks to the broader economy.

Still, other labor market indicators present a more cautious picture. Surveys of small businesses have shown weaker hiring intentions, while the Conference Board reported that the share of consumers who believe jobs are "hard to get" reached its highest level in roughly five and a half years during June. These conflicting signals have left economists divided over whether the payroll strength can continue.

Some analysts believe softer business surveys could eventually translate into weaker hiring numbers. Others argue that the broader labor market remains fundamentally healthy and that recent gains beyond healthcare into additional industries suggest employment growth could stay relatively steady throughout the year.

The June report may also reflect temporary influences from the FIFA World Cup, which is being jointly hosted by the United States, Canada and Mexico. Leisure and hospitality employment surged by 70,000 jobs in May, with some economists linking the increase to tournament-related activity. Goldman Sachs estimates the event could contribute roughly 40,000 additional jobs in June across hospitality, transportation, retail and professional services.

Other economists are less convinced that the tournament significantly boosted hiring, suggesting instead that an earlier Memorial Day holiday may have influenced May's employment gains. Nevertheless, many expect World Cup-related demand to help support hiring in service industries during June.

Average hourly earnings are forecast to rise 3.5% from a year earlier after increasing 3.4% in May, indicating wage growth remains steady rather than accelerating sharply. Stable wage gains have fueled debate over whether the Federal Reserve needs to tighten monetary policy further, even as inflation remains above its long-term target.

Financial markets currently see roughly even odds that the Fed will raise interest rates at its September policy meeting. The central bank left its benchmark rate unchanged at 3.50% to 3.75% last month but indicated through updated projections that policymakers still anticipate additional tightening later this year if economic conditions warrant it.

Overall, the June jobs report is expected to provide another crucial snapshot of the U.S. labor market and could play a significant role in shaping expectations for the Federal Reserve's next interest rate decision.