Wealth managers and investment strategists have kept a keener-than-usual eye on today’s US jobs numbers.
Why? They’re looking for hard data on what’s really going on in the US economy and whether there are signs of a slowdown – or not. With it being a US bank holiday tomorrow for Independence Day, the jobs data was released today instead of its usual Friday slot. However, the latest US employment statistics, point to a ‘robust’ underlying economy despite concerns that Trump’s tariffs might start to impact. They also give an indication of what we might expect from the Fed at their next meeting at the end of July.
Investment experts have been sharing their reactions to the US jobs data as follows:
Commenting on today’s US non-farm payrolls data, George Brown, Senior Economist at Schroders, said:
“For all the tariff turmoil, the US labour market remains remarkably resilient. Layoffs also remain low, with companies hesitant to let go of workers given labour shortages in recent years. Pockets of this may persist in certain sectors and states given the Trump administration’s hardline stance on immigration. As foreign workers have been a key source of job creation since the pandemic, this could lower the breakeven pace below the 100k required to keep unemployment steady.
“All the while, tariffs are set to feed through to higher prices in the summer. With the Fed focussed on not falling behind the curve again, our base case remains that it will keep rates on hold for the rest of the year.”
Lindsay James, investment strategist at Quilter said: “As has been a theme for some time now, the US economy continues to confound expectations, with the labour market adding 147,000 jobs in June, well above consensus expectations and recent averages. Furthermore, the unemployment rate fell to 4.1%, suggesting that the US economy remains in robust shape. Nervousness has begun to creep into the US jobs market, following ADP’s recent report of private payrolls showing the first contraction in jobs in over two years. With the end of the 90-day pause in reciprocal tariffs ending next week, it was thought that the slowdown was under way.
“However, for now this seems to be far from the case. These job numbers will get far more attention than usual too because investors are watching for any sign that the labour market is beginning to weaken sufficiently to trigger an interest rate cut in July. Despite negative GDP growth in the first quarter and data suggesting the US is beginning to experience the pricing impacts of the tariff policy, this is yet to feed into the wider economy and the jobs market continues to grind away.
“Ultimately, this gives Jerome Powell and the Federal Reserve the cover it will want to hold rates at the next meeting. Prior to this data, the market had a 25% chance that the Fed would cut rates in July given some of the more supportive comments from members in recent days – this now just stands at a close to 5% chance. Indeed, Donald Trump is getting more vocal, and indeed vociferous, in his criticism of the Fed and its interest rate policy, perhaps looking to influence the next meeting and take credit. For now, though, Jerome Powell has been non-committal, resisting the constant pressure from the White House. With the jobs report continuing to indicate things are okay, and potentially even better than hoped for, in the US economy, he will feel vindicated with his policy.
“Trouble has yet to hit US employment, and as such the Q1 GDP figure is likely to be consigned to being a blip. Uncertainty remains ever present due to the unknowns surrounding tariffs, but for now the Fed can keep calm and carry on with its plan.”
Daniele Antonucci, Chief Investment Officer at Quintet Private Bank (parent of Brown Shipley) said:
“The upside surprise in the US job market report is significant and will likely incentivise the Fed to keep rates unchanged in the near term. Non-fam payrolls surprised to the upside and last month’s data were revised up. Importantly, the unemployment rate dropped to 4.1%, beating predictions of a rise to 4.3%.
“Interest rate cycles are also diverging. The Bank of Japan is raising interest rates while the ECB and the Bank of England are cutting. Due to the US trade tariffs, the Fed is likely facing the toughest trade-off between the risks of fuelling inflation and negatively impacting growth.
We think downside risks to growth will eventually dominate if sweeping tariffs are put in place, prompting the US central bank to lower interest rates. However, the bar to cut rates will be higher for the Fed than the ECB and BoE, given more pronounced inflation risks.
“Moreover, a high level of government debt and a large budget deficit in the US could keep US Treasury yields more elevated.”
