The American jobs machine slipped a gear in June. The world’s largest economy added just 57,000 jobs last month, barely half the 110,000 that Wall Street had pencilled in and the first undershoot in employment growth since the US-Iran war began.

The figure, published by the Bureau of Labor Statistics, is the weakest since payrolls contracted by 155,000 in February. Yet the report was not uniformly gloomy: the unemployment rate fell to 4.2 per cent from 4.3 per cent, defying forecasts of no change.

Much of the disappointment centred on the football World Cup, which kicked off on June 11 across 11 US host cities. Analysts had expected the tournament to lift hiring in hospitality and related sectors. Instead, payrolls in food and accommodation fell by 55,000. “We haven’t seen any major indication of World Cup related hiring yet,” said Shruti Mishra, US economist at Bank of America.

That is not to say the tournament has left no trace. Host cities have reported a 5 per cent rise in spending at restaurants and bars during the competition, against an average of 3.8 per cent across the rest of the country, according to Bank of America’s credit card spending data. The spending is flowing; the jobs, so far, are not.

The broader picture is one of deceleration on both sides of the ledger. The public sector generated 8,000 jobs, down from 32,000 in May, while the private sector added 49,000, down from 97,000. Jobs growth was strongest in education, professional and business services, social assistance and healthcare. Figures for April and May were revised down by a cumulative 74,000, with the losses concentrated in leisure and hospitality, a pattern familiar to readers who have followed the slowdown in the US jobs market over the past year.

Until now, the US labour market had performed better than forecast since the war in Iran, buoyed by booming private sector investment in artificial intelligence and resilient consumer spending. Average hourly earnings growth was unchanged at 0.3 per cent on the month, with the annual rate edging up to 3.5 per cent from 3.4 per cent.

All eyes now turn to the Federal Reserve. Kevin Warsh, who took over as chairman in late May, has made clear the central bank will prioritise bringing down above-target inflation over its mandate to ensure full employment. Traders trimmed their expectations of two interest rate rises after the data landed.

Holger Schmieding, chief economist at Berenberg, said the slowdown would push the Fed into leaving borrowing costs unchanged this month. “President Donald Trump has deported Goldilocks, the ability of the US economy to expand at a solid pace without generating excess inflation,” he said.

The miss was not entirely unforeseen. Economists at Citigroup had forecast a softer 25,000 to 85,000 expansion, citing rising unemployment claims, weaker private sector hiring intentions and a drop-off in job postings in June.

Markets took the news in their stride. The dollar declined by 0.6 per cent against a basket of currencies on Thursday, while government bond prices were stable. Seema Shah, chief global strategist at Principal Asset Management, said the report “should ultimately be welcomed by markets”.

She added: “We continue to expect the Fed to hold rates steady through to the year-end. However, if unemployment keeps falling, the case for additional policy tightening later this year will become increasingly compelling.”

Amy Ingham

Amy is a newly qualified journalist specialising in business journalism at Business Matters with responsibility for news content for what is now the UK’s largest print and online source of current business news.