Jobs stronger than expected, markets reach record highs
Summary
Although it was a short trading week due to the Fourth of July holiday, there was no shortage of economic data and news. President Trump was able to garner support for the “One big, beautiful bill” and sign the tax and spending bill into law by his self-imposed July 4 deadline. He also continued to pressure Chair Powell to lower rates, but with the stronger than expected jobs report and the unemployment rate at just 4.1%, it is unlikely Chair Powell will cut rates at the July meeting. The S&P 500 posted a gain of 1.75% on the week, while the 10-year U.S. Treasury rose 7bps closing the week at 4.35%.
Employment situation
The jobs report showed the labor market remained resilient, adding 147,000 jobs in June, handily beating expectations. Additionally, the prior revisions were positive, adding 16,000 jobs to the previously reported numbers over the past two months. This was welcomed news as the ADP report released earlier in the week had many economists worried, showing a contraction of -33,000 private payrolls. However, it continues to be a poor forecasting tool for the BLS report. That said, the BLS numbers did show a slowdown in private non-farm payrolls, posting its lowest reading since October 2024. However, state and local governments added 73,000 jobs in June, which propelled the headline number higher.
Source: BLS
Other key news and releases
Both the Chicago and Dallas Fed Manufacturing surveys showed continued weakness. The ISM manufacturing index also remained in contractionary territory but did show a slight uptick to 49, its best reading since March and beating expectations. ISM services also came in slightly higher than expectations with a reading of 50.8. Job Openings unexpectedly increased showing 7.77 million jobs open, while jobless claims fell to 233,000, both indicators that the labor market does in fact remain resilient.
There were also plenty of headlines surrounding U.S. fiscal policy and trade policy over the week. First, President Trump signed the One Big Beautiful Bill Act locking in prior tax cuts as well as cutting spending on several programs, most notably Medicaid. Additionally, President Trump announced that the U.S. and Vietnam are close to a trade agreement. Both of these developments helped bring some clarity on U.S. fiscal and trade policy helping markets propel higher with the S&P 500 and Nasdaq 100 closing at record highs. However, some of this optimism abated over the weekend as the president announced he would be sending tariff letters to several countries with some of the rates reverting back to the April 2 levels.
The week ahead
It will be a relatively light week with only a few items on the calendar, including the NFIB optimism index, the release of the Fed’s FOMC May meeting minutes, and several Fed Governor speeches.
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