The count of Americans sitting outside the workforce climbed to a new extreme in June, reaching 105.8 million after rising by 832,000, according to data shared by The Kobeissi Letter citing the Federal Reserve Bank of St. Louis. That retreat happened as employers adding 57,000 jobs in June missed the 110,000 forecast and coincided with a drop in the participation rate to 61.5%.
The June total sits 2.2 million above the prior high set during the 2020 shutdown period, and 2.5 million people have left the labor force so far in 2026.
That shift matters for the same reason the weak payroll print does: fewer people working or looking for work can change how investors read the economy’s momentum and the path for interest rates.
Record Number of Americans Outside the Workforce Raises Concerns
June’s unemployment rate dipped to 4.2% from expectations of 4.3%, but the decline came alongside a 0.3 percentage point slide in labor force participation to 61.5%.
In other words, the jobless rate improved partly because some people stopped searching for jobs rather than because hiring surged, and the employment-to-population ratio also moved lower.
Payroll growth also looked softer after revisions: April’s gain declined to 148,000 from 179,000, and May was cut to 129,000 from 172,000.
Those two months together were marked down by 74,000 jobs, reinforcing the idea that June’s 57,000 increase followed a cooling trend rather than a one-off stumble.
The longer-run comparison is stark: the non-participation pool stood at 68.7 million at the start of the century, and it now equals 38.5% of the 16-and-over population, the highest reading since the 1970s outside the pandemic window.
What Does This Labor Market Shift Mean?
Where jobs did show up in June, the gains were concentrated in professional and business services (36,000), social assistance (25,000), and health care (22,000).
Even health care’s increase lagged its more typical pace, while leisure and hospitality was the standout weak spot, shedding 61,000 positions amid softer seasonal hiring.
Other major categories like manufacturing, retail, transportation, financial activities, and government were roughly flat, leaving the overall picture dependent on a few pockets of hiring.
At the same time, pay growth held steady: average hourly earnings rose 0.3% on the month and were up 3.5% from a year earlier, matching expectations for June’s annual pace.
June Job Data Signals Fed Policy Changes Ahead
The June report was the first employment update since the Fed’s June 17 meeting, when Chair Kevin Warsh‘s committee kept rates at 3.50% to 3.75% while pushing projections in a more hawkish direction.
After the softer hiring and downward revisions, traders repriced the next meeting quickly, with the CME FedWatch tool showing hike odds for July 29 falling to about 22% and a hold at 78%.
Energy prices also shifted in the background: crude was described around $67 a barrel after being above $90 in early June as the war with Iran’s inflation shock faded.
Rate-sensitive assets moved as hike fears eased, with the 2-year Treasury yield at 4.183% and the U.S. dollar index down 0.01% to 100.76, while gold rose 1.12% to about $4,017.6 an ounce at the time of writing.
Photo courtesy: Shutterstock
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
Recent Comments