The American job market exceeded expectations in June, posting job gains of 147,000 and seeing the unemployment rate tick down by a tenth of a point to 4.1%.

All in all, it’s an acceptable report, but not without its flaws – some conditional and some fundamental – which must be taken into account.

For example, why did the unemployment rate fall? One would think it’s due to more people finding jobs, but in this case, just the opposite is true. The civilian labor force – the number of people working and/or looking for work – shrank by 130,000. That’s a lot of people who have just given up looking for work. When that happens and all else stays the same, the rate falls.

Another thing we should keep watching is the labor force participation rate, which dropped from 62.4% to 62.3%, not alarming, but from 62.6% a year ago, a drop considered notable.

Along racial and ethnic lines, the data shows inequity. Unemployment among whites is 3.6%, among Asians it’s 3.5%, among Hispanics it’s 4.8%, and among African-Americans it has ballooned to 6.8%.

The distribution of the job gains is troubling for the second straight month. Of the 147,000 jobs created in June, 73,000 – half – came in the government sector. Another 39,000 came in health care and 19,000 came in social assistance. Among the three sectors, 89% of June’s job growth occurred. The other eight sectors showed little or no growth or actual losses. Uneven growth is vulnerable.

Further, that 73,000 figure for government jobs seems inordinately, curiously high. Given the intense activity of DOGE earlier in the year – layoffs, closings, etc. – and all the subsequent appeals and reversals, this is questionable at best.

All in all, what appears to be an OK job report is shaky and suspicious, and will be tested in the upcoming months.