A MARTÍNEZ, HOST:

Some disappointing news from the Labor Department this morning. After several months of what appeared to be solid job growth this spring, hiring slowed sharply in June. NPR’s Scott Horsley joins us now with details.

Scott, I mean, it looked for a while as if the job market was stabilizing. What happened?

SCOTT HORSLEY, BYLINE: Yeah. Well, we always want to caution against reading too much into a single month’s report, but the numbers released by the Labor Department this morning are not pretty. U.S. employers added just 57,000 jobs last month. That’s less than half the number they added in each of the two previous months, even though it turned out hiring in April and May was also significantly weaker than initially reported.

Healthcare did continue to add workers in June, albeit at a slower pace than in previous months. And the hospitality sector, which had a strong month in May, actually shed 61,000 jobs last month. So there are some positives in today’s report. You know, we continue to see modest hiring in construction and manufacturing, for example. But overall, this is not what you would hope to see in a job market that was really stabilizing.

MARTÍNEZ: The thing is, the unemployment rate actually dropped last month. So what’s happening?

HORSLEY: Yeah. The unemployment rate dipped to 4.2% in June, down from 4.3% the month before, but that’s only because more than 700,000 people dropped out of the workforce last month. And when people are neither working nor looking for work, they’re no longer counted as unemployed. Now, we are still not seeing a whole lot of layoffs, and that’s good, but we’re also not seeing a lot of people quit their jobs voluntarily in order to go after other perhaps better jobs. You know, a few years ago, that was a good way to get a higher salary was to switch jobs, but the economic incentive for switching jobs is no longer so strong. And so labor economist Nicole Bachaud, who’s with the job search website ZipRecruiter, says we’re just seeing a lot less turnover in the job market now.

NICOLE BACHAUD: We’re seeing existing workers staying very comfortably in the places that they’re in, which is creating kind of a bottleneck of getting into the workforce.

HORSLEY: You know, on the plus side, people who have a job generally don’t have to worry a whole lot about getting fired. But for people who are trying to break into the job market, like new college graduates, it’s really challenging because there just are not a lot of openings to get that initial foot in the door.

MARTÍNEZ: Wow. All right. So what’s happening with wages then?

HORSLEY: Average wages in June were up 3.5% from a year ago. That is a slightly bigger annual increase than the previous month, but that improvement is probably at least partly the result of a lot of low-wage leisure and hospitality jobs drying up last month.

The more important measure is how are wage gains stacking up against inflation. And right now, they are not keeping pace. Prices are growing faster than paychecks. So when workers say they feel like they’re losing ground, they’re not wrong. Bringing inflation down would certainly help with that, and the new chairman of the Federal Reserve, Kevin Warsh, has promised to do that. Warsh spoke yesterday at the central bankers’ panel in Portugal, and he told the moderator, Sara Eisen of CNBC, he and his Fed colleagues are determined to get prices under control, even if that means bucking President Trump’s demand for lower interest rates.

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KEVIN WARSH: We’re going to deliver price stability in the U.S. That’s what this committee has signed up to do, and our objective is to do that.

SARA EISEN: No matter what the president wants?

WARSH: We’ve been an independent central bank for a very long time. We’re going to be an independent central bank at this moment, and you’re going to see no changes on that.

HORSLEY: You know, yesterday, investors thought there was about a 1 in 3 chance the central bank would raise rates when Warsh and his colleagues meet later this month, but with this shaky jobs report, odds of a rate hike have dropped to less than 1 in 5.

MARTÍNEZ: That’s NPR’s Scott Horsley. Scott, thanks.

HORSLEY: You’re welcome.

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