As investors continue watching the Federal Reserve’s next move on interest rates, the upcoming June jobs report stands out as a critical point of focus. Over the past few months, while the U.S. labor market has remained resilient to some extent, signs of slowing momentum are beginning to surface—adding to the growing divide in market opinions about the direction of the U.S. economy.

According to the latest data from the Bureau of Labor Statistics (BLS), nonfarm payrolls rose by 139,000 in May, while the unemployment rate held steady at 4.2%, roughly in line with the average over the past year. Job growth was led by sectors such as healthcare, leisure and hospitality, and social assistance, while federal government employment continued to contract. On the surface, the numbers may not seem worrying, but it’s worth noting that initial figures from previous months have consistently been revised downward, pointing to a weaker labor market than initially reported.

More importantly, we’re seeing shifts in the structure of employment growth. Nearly half of new jobs came from the healthcare sector alone. Meanwhile, job openings in sectors like office work, tech, retail, and dining have been declining. Although the scale of layoffs remains moderate, the concentration of job growth in just a few industries suggests the overall employment base is becoming narrower. As of mid-June, only about 52% of industries had job openings above pre-pandemic levels—a sign that the labor market’s breadth is weakening.

Investors largely expect the June jobs report to play a key role in shaping the Fed’s next steps. With uncertainty already looming due to negative GDP growth, weak consumer confidence, and an unclear policy roadmap, the Fed is under pressure to proceed cautiously. If job numbers come in soft, it could pave the way for a rate cut later this year. However, if data continues to surprise to the upside, the risk of an overheated economy remains—and any potential rate cuts could be pushed further out.

Whether the U.S. can pull off a “soft landing” remains up for debate. Some sectors have held up well, but signs of strain are emerging in the broader labor market. The June employment data will likely have a direct impact on the dollar, bond yields, and investor appetite for risk. For anyone keeping an eye on the markets, this report could offer a pivotal signal about where the Fed may be heading next.