US economy adds 850,000 jobs in June as unemployment rate ticks higher

Unemployment rate rises to 5.9%

U.S. employers added more jobs than expected last month as additional states announced plans to wind down extended unemployment benefits.  

Nonfarm payrolls increased by 850,000 workers in June as the unemployment rate ticked up to 5.9%, the Labor Department said Friday. Analysts surveyed by Refintiv were expecting the addition of 700,000 and the unemployment rate to fall to 5.7%. May’s reading was revised higher by 24,000 jobs to 583,000. 

The stronger than expected report "may be a sign that some of the temporary labor shortages holding back the employment recovery are starting to ease," said Andrew Hunter, senior U.S. economist at research firm Capital Economics. "The acceleration in employment growth was driven by sectors most closely affected by the continued return to normalcy."


Sizable job gains were seen in leisure and hospitality (+343,000), public and private education (+269,000), professional and business services (+72,000), retail trade (+67,000), and other services (+56,000). Industries including construction and healthcare saw little change.  

The jobs gains came as at least 26 states have ended or announced plans to end the $300 per week supplemental unemployment benefits that are scheduled to expire in September. Additionally, average hourly wages in June increased 3.6% year over year, helping lure laborers back to work.

Still, there were signs that the "recovery remains slow and uneven," said Sameer Samana, senior global market strategist at Wells Fargo Investment Institute. He pointed to the average workweek shrinking 0.1 hour to 34.7 hours and the labor force participation rate holding steady at 61.8%. 

There were 6.8 million, or 4.4%, fewer workers than in February 2020, just before the COVID-19 pandemic caused much of the economy to shut down.


Friday's report was "an all-out positive" from a markets perspective, said Seema Shah, chief strategist at Principal Global Investors. Still, she says the report doesn't clarify whether the Federal Reserve will soon begin to taper its asset purchase program and raise rates. 

"The ‘will they, won’t they’ Fed question still stands, but at least today’s number isn’t triggering major navel gazing," Shah said.