The picture underlying the June employment report is far more worrying than the headline figures suggest, and the real story lies in full-time employment.

According to official data, total non-farm employment increased by only 57,000 in June, but this figure is based on an institutional survey. The household survey, however, presents a much harsher picture, with total employment decreasing by 507,000 according to this survey. While the drop in the unemployment rate to 4.2% sounds like good news, this is due to the collapse of labor force participation; much of the decrease in the unemployment rate is due to people giving up searching for work and leaving the labor force altogether. The labor force decreased by 720,000 people in a single month, and the participation rate fell to 61.5%, the lowest level seen since 1976, excluding the COVID period. The employment-to-population ratio also fell to 59%, the lowest level since 2021.

Within this overall picture, the collapse in full-time employment is particularly striking. According to the figures released, full-time employment fell by 514,000 people in June to 133.66 million, the lowest level since December 2024 and marking the third consecutive monthly decline. The total loss since January 2025 has reached 2.24 million people, bringing full-time employment back to levels seen in the first quarter of 2023. The full-time employment-to-population ratio also fell from 50.5 percent in 2022 to 48.5 percent, the lowest reading since mid-2021.

This situation has also attracted the attention of economists. RBC's chief US economist described this decline as a mass exodus, suggesting it could be partly due to a wave of retirements and partly due to job seekers giving up. Some economists point out that the April and May figures were also revised downwards, emphasizing that the total for those two months was 74,000 lower, meaning the weakness wasn't limited to a single month. While some analysts suggest that the sharp decline in the leisure and hospitality sector may have made the data a bit noisy, it's generally accepted that the drop in the participation rate is part of a long-standing trend.

The real significance of this data for the markets lies in the fact that the rate at which full-time jobs are shrinking indicates that household incomes and consumer spending may remain under pressure in the medium term, representing not just a labor market problem but a potential growth problem. At the same time, this weakness increases pressure on the Fed's interest rate path; weak employment data generally reinforces expectations of loose monetary policy, and indeed, after this data, the market significantly reduced the likelihood of an interest rate hike. For those following macroeconomic developments and risk assets through Gate, the key point to watch is whether the July data will clarify whether this weakness is a temporary deviation or a sign of a permanent slowdown, particularly whether the erosion in full-time employment will continue.

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