Job growth exceeded expectations in June for a fourth straight month, and the unemployment rate unexpectedly declined, crushing expectations of a July rate cut. The chance of a September rate cut was reduced to about 75%.
Payrolls increased 147,000 after slight upward revision to the prior two months and compared with a median forecast of 106,000. The unemployment rate fell to 4.1% from 4.2% as the number of unemployed fell for the first time in five months and the participation rate—the share of the population that is working or looking for work—also declined.
State government payrolls was the primary reason for larger than expected increase in nonfarm payrolls as such increased by the most since the start of 2023, led by education while employment at local governments also surged. The job cuts from DOGE are virtually nonexistent. Will this soon change?
Treasuries sold off across the curve on the data.
This week is the commencement of second quarter earnings season. As noted numerous times the inflationary aspects of the tariffs are not reflected in the data. Will they be reflected in corporate margins as it appears companies are absorbing the costs to maintain market share rather than passing the increased costs onto the end user?
Many including FRB Chair Powell expect inflation to rise later in the year, the result of the tariffs.
Speaking of tariffs, the 90-day moratorium ends on July 9. Will this date be a nonevent or something consequential?
This is also a week of several Treasury auctions. What yield will investors demand?
The unexpected is continuing to occur. Is this the result of outdated sampling techniques that perhaps does not capture the massive changes in the economy? Perhaps.
The economic calendar is comprised of the Minutes from the recent FOMC meeting, a sentiment survey and wholesale inventories.
Last night the foreign markets were mixed. London was up 0.05%, Paris up 0.17% and Frankfurt up 0.82%. China was up, 0.02% Japan down 0.56% and Hang Seng down 0.12%.
Dow and NASDAQ futures are flat and down 0.40%, respectively on tariff fears and decline in TSLA’ shares as Musk has indicated that he wants to form a new political party. The President has pushed out the tariff deadline to August 1 from July 9. The 10-year is off 3/32 to yield 4.36%.
