Jobs growth slows in US as borrowing costs climb

US jobs growth slowed last month in a sign that the weight of higher interest rates may be starting to slow the world's largest economy.

Employers added 209,000 jobs in June, the smallest gain in more than two years, the Labor Department said.

That was fewer than expected, though the unemployment rate still fell to 3.6%, down from 3.7% in May.

The labour market is being watched closely, as the US central bank lifts borrowing costs to fight inflation.

Hiring has remained strong, despite the Federal Reserve's benchmark interest rate jumping to more than 5% in little over a year.

That held true in June, when analysts said the 209,000 jobs added were more than enough to accommodate growth in the labour force, despite it being the smallest number since December 2020.

Wages also continued to climb, with the average hourly pay up 4.4% from a year ago.

But the monthly report comes alongside other data, such as a drop in job vacancies, that suggest the labour market may be cooling.

"Today's jobs report is slightly weaker than many expected," said Richard Flynn, managing director at Charles Schwab UK.

"The labour market remains tight, but investors will likely interpret these numbers as a sign that cracks are beginning to emerge."

Economists have been predicting a slowdown for months, as higher interest rates force consumers to cut back spending in other areas and make borrowing for business expansions more costly.

The government and healthcare firms drove the hiring in June. Retailers and transportation firms shed jobs, while leisure and hospitality businesses added just 21,000 positions.

Analysts said they still expected the US central bank to raise rates again at its meeting this month.