WASHINGTON US job growth slowed to a still-healthy pace in June, with the unemployment rate rising to 4.1%, increasing the chances that the Federal Reserve will be able to tame inflation without tipping the economy into recession.

Non-farm payrolls increased by 206,000 jobs last month, the Labor Department's Bureau of Labor Statistics said in its closely watched employment report on Friday. Data for May was revised sharply down to show 218,000 jobs added instead of the previously reported 272,000.

Average hourly earnings rose 0.3% after advancing 0.4% in May. In the 12 months through June, wages increased 3.9%. That was the smallest gain in wages since June 2021 and followed a 4.1% rise in May. Wage growth in a 3%-3.5% range is seen as consistent with the Fed's 2% inflation target.

The unemployment rate rose to 4.1% from 4.0% in May.

When added to the moderation in prices in May, the report confirmed that the disinflationary trend was back on track after inflation surged in the first quarter. It also could boost Fed policymakers' confidence in the inflation outlook and push the US central bank a step closer to start cutting rates later this year.

The Fed has maintained its benchmark overnight interest rate in the current 5.25%-5.50% range since last July. The minutes of the central bank's June 11-12 meeting, which were published on Wednesday, showed policymakers acknowledged the economy appeared to be slowing and that "price pressures were diminishing."

The US central bank has hiked its policy rate by 525 basis points since 2022 to curb inflation. Financial markets remain optimistic the Fed could start its easing cycle in September.

  - Reuters