The Labor Department said Thursday that the unemployment rate declined to a low 4.2% from 4.3% in May, though the decline mostly occurred because many people out of work gave up looking and were no longer counted as unemployed.

The figures suggest businesses remain wary of the economy’s health, with inflation at a three-year high and consumer confidence near post-pandemic lows. The solid job gains that were initially reported in April and May were also revised lower. Hiring in May was marked down to 129,000 from 172,000, while April’s job gains are now 148,000, down from an initial estimate of 179,000.

Restaurants, bars, and hotels cut 61,000 jobs, a sharp disappointment for those who expected the World Cup tournament that is taking place in multiple U.S. cities would lead to at least temporary job gains. Retailers also shed 7,500 jobs.

Many businesses may be wary of hiring as they navigate the implementation of artificial intelligence, but last month professional and business services, a category that includes architecture, engineering, and software developers — occupations expected to be vulnerable to AI — added 36,000 jobs. Healthcare, the economy’s most consistent job creator, added nearly 47,000 positions.

The economy is growing modestly despite ongoing challenges. It expanded at a 2.1% annual pace in the first three months of the year, though some forecasts expect it will slow in the April-June quarter. But a job market that can continue to generate at least some jobs should enable many consumers, particularly upper-income ones, to remain resilient and spend more.

Ongoing job gains, however, suggest that the Federal Reserve’s key interest rate, at about 3.6%, may not be high enough to restrain the economy and cool inflation. Fed chair Kevin Warsh in Portugal Wednesday reiterated that he would push inflation back to the Fed’s 2% target, though he wouldn’t comment on whether the Fed would raise rates at its next meeting, in July.

Historically, a job gain of just 57,000 would be seen as weak. Yet as more Americans retire and new immigration has dropped sharply, the U.S. workforce is barely growing. In that case, some economists think even gains at that level may be enough to keep the unemployment rate unchanged — or even lower it.

Mismatches between job-seekers and employers could be slowing hiring as well. Nicole Bachaud, labor economist at ZipRecruiter, said AI adoption could have encouraged a trend she’s noticed on their website: Companies are increasingly posting jobs seeking more senior, experienced workers, while job hunters are instead gravitating toward entry-level jobs.

With far fewer people quitting their jobs than just after the pandemic, Bachaud said, companies are having more trouble recruiting experienced workers from other businesses. At the same time, that’s left less-experienced workers struggling to break into the job market.

That gap “just shows the mismatch between what employers are looking for and what current job seekers have to offer,” she said. It has likely contributed to the frustration many job seekers feel even as the unemployment rate remains low.