US job growth stalls in June amid high inflation and Iran War impact

The U.S. labor market showed signs of weakness in June, with hiring falling far below expectations amid persistent inflation fueled by the Iran War. The economy added just 57,000 jobs, a steep decline from the 172,000 jobs added in May. This slowdown contrasts sharply with the strong performance seen earlier in 2026, when employers added an average of 114,000 jobs per month from January to May.

The sluggish hiring pace comes despite the labor market's surprising resilience in the face of rising costs for businesses and consumers. The conflict in the Middle East, which began on Feb. 28, led to the closure of the Strait of Hormuz, disrupting global oil supplies and triggering one of the largest oil shocks ever recorded. Annual inflation remains elevated at 4.2%, more than double the Federal Reserve's target rate of 2%.

The combination of high inflation and a resilient labor market has increased the likelihood of an interest rate hike, according to futures markets. The CME Group's FedWatch Tool pegs the odds of a rate hike in September at about 64%. Federal Reserve Chair Kevin Warsh reiterated the central bank's commitment to bringing inflation down, stating, 'Persistently high prices are a burden for the American people. This committee will deliver price stability.'

However, the path forward remains uncertain. Oil and gasoline prices have eased recently due to negotiations between the U.S. and Iran, offering hope that inflation could cool without rate increases. Warsh also weighed in on the potential impact of AI on the labor market, suggesting that the technology could create jobs and boost productivity, strengthening the economy.