US job market returns to unexpected strength as local governments hire

DOGE might be hitting the federal workforce, but public-sector hiring at the state and local level was enough to drive a better-than-expected June US payrolls report. Revisions also showed the gravity-defying job market added more jobs in past months than originally estimated -- reaffirming expectations that the Federal Reserve will leave rates unchanged this month.

The US economy added 147,000 jobs in June, non-farm payrolls showed; the biggest sectoral contribution was 73,000 jobs at all levels of government -- despite 7,000 federal jobs lost. The second-biggest positive contributor was education and health services (51,000).

Skeptics pointed to possible seasonal adjustment issues in the public-sector figures, as well as weak private-sector hiring. However, as our chart shows, only four sub-sectors were shedding jobs in June, and those were relatively few compared to trends in most of 2024.

Our second chart breaks down federal, state and local hiring. The DOGE period after Trump's election stands out; the federal government has been cutting jobs for five months straight.

Finally, we consider revisions. The initial monthly NFP figure by the Bureau of Labor Statistics (BLS) is followed by an initial revision one month later and a second revision one month after that. Finally, an annual revision is made each year.

The May 2025 payroll gain was revised upward to 144,000 from 139,000. And the final figure for April (158,000) was revised to be higher than the second estimate (147,000), though not as high as its initial reading (177,000).

These revisions broke an early 2025 trend that had seen repeated downward revisions. (As we considered DOGE in February, we visualized how late 2024 was a period when the US job market's strength was initially -- and repeatedly -- underestimated; this was also the case during the post-pandemic recovery of 2021-22.)

Fed Chair Jerome Powell, who is under attack by the Trump administration, remains concerned about tariff-induced inflation, and has said the job market would need to meaningfully weaken for rates to be cut sooner.