US Economy Beats Forecasts with 147,000 New Jobs in June, Dimming Hopes of Rate Cuts

The US economy defied expectations by adding 147,000 new jobs in June 2025, according to data from the Bureau of Labor Statistics (BLS). This figure was higher than the revised May total of 144,000 and the Bloomberg economist forecast of 110,000. This eased concerns that trade pressures and policy questions would affect hiring.

Join PSU Connect on WhatsApp now for quick updates! Whatsapp Channel

The recent job growth helped boost Wall Street. The S&P 500 rose 0.8% to a new record during a shortened session ahead of Independence Day. However, US Treasury bonds faced a sell-off, and the yield increased by 0.4% as traders lowered their expectations for a near-term interest rate cut by the Federal Reserve.

The unemployment rate dropped to 4.1%, a small improvement. Still, some analysts pointed out that this drop was largely due to people leaving the labor force instead of new hires. Long-term unemployment actually rose by 190,000, reaching 1.6 million.

Job growth was led by healthcare and state governments. A significant portion of June's job gains came from the healthcare sector and an unexpected rise in state government employment. This marked a shift after two years of little change. Along with hospitality and leisure, these three sectors accounted for 87% of job growth since early 2023, according to ING economist James Knightley.

In contrast, traditional job-creating industries showed limited growth. Meanwhile, employment in federal government continued to decline, with a loss of 69,000 positions since January. This drop is partly due to cost-cutting measures influenced by Elon Musk’s focus on efficiency.

The stronger-than-expected job numbers may reduce the pressure on the Federal Reserve to cut rates at its upcoming July meeting. Expectations for a rate cut this month have fallen to just 5%, down from 25% before the data was released. 

“This report takes a July rate cut off the table,” said Andy Brenner, head of international fixed income at NatAlliance Securities. He also mentioned that even a September rate cut is now uncertain, especially if inflation data does not show a significant drop.

Despite the positive headlines, some analysts expressed concerns about underlying issues. Diane Swonk of KPMG highlighted the low labor force participation, stating, “There’s a sense of a frozen job market. The unemployment rate fell, but for the wrong reasons.” 

Others raised worries about the impact of immigration on the labor force. The foreign-born labor force has decreased for three consecutive months, marking the largest decline since the early days of the COVID-19 pandemic. This trend may reflect the ongoing effects of the Trump administration's immigration policies and tariffs.

Florian Ielpo of Lombard Odier noted that much of June’s unexpected growth came from a temporary increase in state government hiring, suggesting that the overall situation may not be as strong as it appears.