While the Labor Department's closely watched employment report on Thursday showed the unemployment rate dropped to 4.2 per cent last month, that was because about 720,000 people left the labour force which pushed down the participation rate to the lowest level in more than five years.
Some economists said the slowdown in job growth was probably a delayed reaction to the Middle East war.
"Policy makers at the Fed have not articulated their reaction function but they plainly won't like this employment report," said Christopher Rupkey, chief economist at FWDBONDS.
"It is hard to keep track of which way the pendulum is swinging in the labour market as the stronger jobs picture just a month ago has suddenly weakened perhaps with the delayed reaction to the war in the Middle East."
Non-farm payrolls increased by 57,000 jobs last month after a downwardly revised 129,000 rise in May, the Labor Department's Bureau of Labor Statistics said.
Economists polled by Reuters had forecast payrolls advancing 110,000 after a previously reported 172,000 increase in May.
Estimates ranged from as low as 25,000 to as high as 200,000.
The payrolls count for April was revised down 31,000 jobs to 148,000.
The report was released a day early due to Friday's public holiday marking the United States' 250th anniversary of independence on Saturday.
The moderation brings payrolls into alignment with other labour market surveys, including small business hiring plans, which have offered a less-robust picture of the jobs market.
Traders priced in a much slimmer chance of a rate hike from the Fed this month but continued to see monetary policy tightening in September as likely, with short-term interest-rate futures reflecting about a 60 per cent chance of a hike.
The drop in the unemployment rate was from 4.3 per cent in May and was flagged by a Conference Board survey on Tuesday that showed the share of consumers viewing jobs as "hard to get" near a five and a half-year high in June.
Economists estimated the economy needed to create between zero and 50,000 jobs per month to keep up with growth in the working-age population.
The so-called break-even rate has dropped because of an immigration crackdown that has reduced the labour force, keeping the unemployment rate down.
The labour force participation rate dropped to 61.5 per cent last month, the lowest level since March 2021.
Professional and business services led job gains last month, with 36,000 positions added.
Social assistance employment increased 25,000 while healthcare payrolls rose 22,000 - below the monthly average gain of 38,000 over the past year.
Leisure and hospitality employment dropped 61,000 despite hopes that the World Cup tournament would boost hiring.
