U.S. job growth slowed significantly in June, prompting markets to reassess the Fed’s policy path over the coming months. Following the data release, expectations for an early rate hike this year eased, U.S. stock futures rose, Treasury yields declined, and Bitcoin held above $61,000.
June non-farm payrolls came in below expectations
The non-farm payrolls report released by the U.S. government on Thursday showed that employment increased by 57,000 in June, below the economist forecast of 110,000 and significantly lower than the revised 129,000 for May. The initial estimate for May was 172,000, which was later revised downward.
The unemployment rate stood at 4.2%, slightly better than the market expectation of 4.3% and lower than the 4.3% recorded in May. This indicates that job growth has slowed, but the unemployment rate has not risen in tandem.
- June non-farm payroll employment increase: 57,000
- Market expectation: 110,000
- Unemployment rate: 4.2%
Interest rate hike bets quickly retreated
Before this data release, markets were still absorbing the pressures from rising inflation and higher energy prices. Two weeks ago, the Federal Reserve signaled a hawkish stance at its policy meeting, causing investors to temporarily raise their expectations for a rate hike this summer or early fall.
After the data release, this assessment was adjusted. According to CME FedWatch, the market had previously priced in about a 65% chance of at least one rate hike before September; within minutes of the data release, this probability fell to 50%.
Bitcoin holds at $61,000
Asset prices immediately moved in tandem. Reports showed that Bitcoin had already strengthened significantly before the data release, with a 4% gain over 24 hours, and continued to hold above $61,000 after the announcement.
U.S. stock index futures also rose, with the Nasdaq 100 futures climbing 0.7% after trading nearly flat before the data release. Meanwhile, the U.S. 10-year Treasury yield fell 4 basis points to 4.46%, reflecting reduced market expectations for further tightening.
Overall, weak employment data has temporarily dampened market expectations for near-term rate hikes, providing support to risk assets. However, inflation had already shown signs of rising, and energy prices remain a key focus for future monitoring.