The US economy added 57,000 nonfarm jobs in June, the Department of Labor reported on Thursday, falling well short of the 110,000 consensus estimate and marking a sharp deceleration from May’s downwardly revised 129,000. The unemployment rate edged down to 4.2 per cent from 4.3 per cent. The data interrupted a recent run of robust labour market readings and immediately recalibrated interest-rate expectations: the probability of at least one Federal Reserve rate increase this year dropped to 76 per cent from around 84 per cent before the release, according to LSEG data.

The softer payrolls print, combined with Wednesday’s ADP private-employment report that also undershot forecasts, alters the calculus for a central bank navigating an oil-price shock from US-Iran tensions. Fed Chair Kevin Warsh acknowledged on Wednesday that inflation risks had eased in recent weeks but reiterated the commitment to the 2 per cent target. Analysts in New York and São Paulo noted that a cooling labour market gives the Fed room to hold rates steady without stoking demand-side price pressures, even as energy costs remain a wildcard. Florian Ielpo, head of macro at Lombard Odier Investment Managers, described the number as “the best we could hope for — the job market is doing fine, but it’s not hot enough to accelerate inflation.”

Wall Street’s main indices advanced, with the Dow Jones Industrial Average rising 0.86 per cent and the S&P 500 gaining 0.67 per cent in morning trade. The Nasdaq Composite underperformed, up 0.56 per cent, as profit-taking in semiconductor stocks tempered the rally. Ten of eleven S&P 500 sectors traded in positive territory, led by materials and consumer staples. Short-dated Treasury yields fell and the dollar weakened. Gold rose 0.7 per cent to $4,057.92 an ounce, supported by lower rate expectations and a dip in oil prices after indirect US-Iran talks in Doha made what Qatari officials called “positive progress,” though no breakthrough on the Strait of Hormuz was reached. Brent crude slipped around 1 per cent to $70.89 a barrel.

The combination of a softening labour market and tentative diplomatic progress in the Middle East shifts the near-term focus to the Fed’s next policy meeting and the durability of the AI-driven equity rally. Market pricing now implies fewer than two quarter-point rate increases through March 2027. The next factual milestones are the release of the Fed’s meeting minutes and any further rounds of US-Iran negotiations, which will test whether the current reprieve in energy markets and rate expectations can hold.