By Matt Grossman

Halfway through the year, the labor market is flashing a virtue that proved elusive for much of 2025: stability. American hiring in 2026 hasn't quite boomed, but it has broadly improved.

The latest numbers, released Thursday by the Labor Department, were a disappointment. June's 57,000 new jobs fell well short of Wall Street forecasts. Sectors that reflect the current health of the economy, including retail and leisure and hospitality, lost jobs.

Yet look beyond the monthly number, and the job market has steadily, if not spectacularly, added an average of around 92,000 jobs a month so far this year. That is a giant leap from average net losses of 8,000 a month over the second half of 2025.

It isn't a repeat of the unstoppable wave of job creation in the years just after the pandemic. But dependable monthly job creation and stronger staffing across a range of industries have made the job market much less concerning than the limp hiring seen late last year.

Then there is the unemployment rate: In June, despite the lower-than-expected hiring, it actually dropped to 4.2% from 4.3%. That is good news on its surface, but the cause is less than ideal.

Thursday's data indicates that the unemployment rate was pulled lower by the unusually large decline in the number of Americans who are either employed or looking for work. With fewer people in the job market, the unemployment rate can fall even when the number of jobs created is falling too.

Economists were scratching their heads over what exactly caused the big drop in the number of workers over the month. Many said they believe it was a statistical fluke that could reverse in coming months.

One thing they do agree on: The size of the workforce has been stagnating for months. Retiring baby boomers are one likely reason. Immigrants dropping out of the workforce during immigration crackdowns is likely another. There were about 169 million people in the civilian labor force in June, down nearly 2.2 million from a peak in November.

Still, it is a job market many economists and investors would have welcomed six months ago, when month-to-month hiring was inconsistent and often heavily concentrated in such fields as education and healthcare. In each of the past few months, more industries have been adding jobs than losing them. A year ago, the opposite was true.

Through the spring, "we were gaining momentum," said Nela Richardson, chief economist at the human-resources and payroll-processing company ADP. "We didn't get that this month, but what we got was a lot of stability," she said, referring to June.

Less whiplash regarding federal economic policy has left businesses more comfortable shifting into hiring mode, said Aditya Bhave, an economist at Bank of America.

Twelve months ago, companies were facing steep new tariffs, and Congress was wrapping up tense negotiations over President Trump's tax-cut bill. Now, companies are landing tariff refunds, and the tax cuts have likely supported consumers and businesses.

"We went through a period of policy uncertainty last year," Bhave said. "Those stories are now a little bit more in the background, and there's been a capacity for the broader labor market to pick up."

Despite elevated inflation, many businesses have found that consumers are still spending freely — especially wealthier customers benefiting from a surging stock market.

At the Biltmore Estate in Asheville, N.C., a mansion museum where tour tickets start at $80, marketing chief Mark Hemphill said visitor growth is on pace for double digits this summer, partly reflecting the region's recovery from Hurricane Helene, which struck almost two years ago. Middle-class tourists are still holding out for travel deals, but the museum has increased its staff to accommodate strong demand from well-heeled visitors, Hemphill said.

"There's a clear bifurcation between the more affluent and the more value-driven, midmarket travelers," Hemphill said.

Heading into the summer, the labor market faces questions about the number of people available to work and businesses' appetite to hire more.

When July data arrives next month, economists will be watching closely for confirmation that the June labor-force drop wasn't the start of a trend.

Meanwhile, steady spending growth across the economy has given companies more reason to add staff. In the midst of booming investment in AI infrastructure, the construction sector has added jobs in five of the past six months, after uneven hiring last year. Consumer spending has been decent, up an inflation-adjusted 2.1% over the 12 months through May — although some economists and business owners are concerned that elevated inflation could force shoppers to tighten their budgets.

Stu Feldschuh, owner of Snowflake Ice Cream Shoppe in Riverhead, N.Y., has seen some soft spots in the local economy. This summer, more teenagers than ever applied for shifts, he said, potentially a sign of scarcer opportunities for young workers around Long Island's ritzy beach towns. Despite facing higher business costs, Feldschuh decided against raising menu prices this season, cautious of turning off customers who are weary of inflation.

Still, sales since Memorial Day have been off to a strong start. "I'm as busy or busier than I've ever been," he said.

Write to Matt Grossman at matt.grossman@wsj.com