A slowdown in hiring in June amid cooling inflation has boosted expectations that the Federal Reserve will begin to cut interest rates this year.
The US economy added 206,000 jobs, more than the 200,000 expected but down from May's revised figure of 218,000.
Unemployment edged above 4% to 4.1% for the first time in more than two years.
“The June US labour market report painted a picture of a labour market that continues to gradually loosen, and normalize, with headline nonfarm payrolls growth moderating to a marginally better-than-forecast 206,000, as unemployment unexpectedly ticked higher to 4.1%, albeit on a firming in participation to 62.6%, making this less of a concern than it otherwise would be,” Pepperstone senior research strategist Michael Brown commented.
Brown said the policy implications of the jobs report are likely to be “relatively limited,” as the inflation side of the Fed’s dual mandate “continues to take precedence.”
“Obtaining greater ‘confidence’ in a return towards the 2% target remains the primary condition that must be met before a cut is delivered, though ‘unexpected’ labour market softness may elicit a policy response in advance of this,” he said.
The analyst continues to expect a 25 basis point cut in September.
”In any case, there remains a clear desire among FOMC members to deliver a cut, likely sooner rather than later, hence the ‘Fed put’ remains forceful, and flexible, in nature,” Brown wrote.
“This should, in turn, continue to support risk assets, with the path of least resistance for equities continuing to point to the upside, leaving dips remaining shallow, albeit with stocks now needing to navigate the looming risk of earnings season, kicking off next Friday.”