U.S. Private Hiring Slows in June as Layoffs Continue to Decline

01 July 2026

America's manufacturing sector continued to expand in June, but the pace of growth cooled after reaching a four year high the previous month. While factories remained busy and production stayed on an upward path for a sixth consecutive month, businesses reported softer demand, declining export orders, and continued pressure from high input costs. The latest figures suggest that manufacturing remains resilient, although companies are becoming more cautious as global uncertainty and inflation continue to influence business decisions.

According to the Institute for Supply Management, the manufacturing Purchasing Managers' Index slipped to 53.3 in June from 54.0 in May. Although the decline was modest and still comfortably above the 50 point threshold that signals expansion, the result fell short of economists' expectations and indicated that the rapid momentum seen during May had begun to ease. Much of the earlier surge had been driven by businesses rushing to place orders ahead of possible supply disruptions and rising prices linked to tensions in the Middle East. As those concerns eased following a fragile ceasefire, the urgency to build inventories also began to fade.

Even with the slight slowdown, manufacturing has now expanded for six consecutive months, marking one of the strongest stretches for the sector since before the pandemic. Analysts say the industry's resilience continues to be supported by enormous investment in artificial intelligence infrastructure. Demand for advanced computer chips, servers, networking equipment, and other technology products has provided a significant boost for manufacturers despite broader economic challenges. AI related spending has become one of the strongest drivers of industrial activity across the United States, helping offset weakness in other parts of the economy.

New orders remained healthy but eased slightly during June. The new orders index slipped to 56.0 from 56.8 in May, suggesting that customers are still placing orders but at a slower pace. At the same time, export demand weakened, and order backlogs declined after improving during the previous month. Those developments indicate that while factories remain active, businesses are beginning to see a more balanced level of demand following the unusually strong buying activity earlier in the year.

One encouraging sign came from supply chains. Delivery times improved modestly as transportation bottlenecks eased and shipping conditions stabilized following the partial reduction in tensions across the Middle East. The supplier deliveries index declined to 57.4 from 60.6 in May, indicating that materials continue arriving more efficiently than they had during the height of recent geopolitical disruptions. Factory inventories also rebounded after an extended period of contraction, suggesting companies have successfully rebuilt stock levels that had previously been depleted.

Although supply conditions improved, manufacturers continue facing elevated production costs. The survey's prices paid index fell sharply to 73.0 from 82.1 in May, reflecting slower inflation at the factory gate. However, economists caution that the reading remains historically high, meaning businesses are still paying considerably more for raw materials and components than they would under normal conditions. Oil prices have retreated from their recent peaks, but demand for technology related products, particularly semiconductors, continues pushing costs higher across many industries.

Employment remains one of manufacturing's weakest areas. Factory hiring continued to contract during June, extending a trend that has persisted for most of the past three years. Many manufacturers remain reluctant to expand payrolls because of uncertainty surrounding future demand and ongoing cost pressures. Instead, businesses appear focused on improving efficiency while carefully managing existing workforces rather than adding significant numbers of new employees.

The report arrives at an important moment for financial markets and Federal Reserve policymakers. Although inflation has moderated compared with earlier peaks, factory input prices remain elevated enough to keep inflation concerns alive. Investors continue closely monitoring manufacturing data because stronger industrial activity can contribute to broader economic growth while sustained cost pressures may complicate the central bank's efforts to return inflation to its long term target.

Manufacturers responding to the survey described an environment that remains challenging but far more stable than just a few months ago. Many noted that while geopolitical uncertainty has not disappeared, the easing of immediate supply chain disruptions has allowed businesses to plan production with greater confidence. Others pointed to artificial intelligence related demand as a major source of optimism, helping sustain investment despite higher borrowing costs and cautious consumer spending.

The latest figures suggest that U.S. manufacturing is entering a more sustainable phase after the rapid acceleration seen in May. Activity remains firmly in expansion territory, inventories are recovering, and supply chains are functioning more efficiently. At the same time, slower new orders, softer exports, elevated costs, and continued weakness in employment highlight the challenges that still lie ahead.

For businesses, the message is one of cautious optimism. Manufacturing continues moving forward, supported by strong technology investment and improving logistics, but companies remain aware that inflation, geopolitical developments, and shifting global demand could quickly alter the outlook. As the second half of the year begins, the sector appears positioned for continued growth, though likely at a steadier and more measured pace than earlier in the year.