Better-than-expected jobs report backs Fed's rate stance

Bloomberg

Employers added more workers in June than forecasted, as job report numbers continue to support a solid economy.

The Bureau of Labor Statistics reported Thursday that the economy added 147,000 jobs last month, up from the 110,000 jobs economists polled by Dow Jones expected. The figure outpaces the 139,000 jobs added in May but falls behind the average gain of 167,600 jobs over the first five months of the year.

Payroll processing firm ADP reported Wednesday that it expected a loss of 33,000 jobs in the private sector this month, the first overall decrease since March 2023. Dow Jones reported an expected increase of 100,000 jobs for the month.

June's unemployment rate also slid from 4.2% to 4.1% based on the data, keeping it near historic lows.

The Federal Reserve has remained patient in its approach to cutting interest rates, wanting to wait and see how the Trump administration's policy changes — mainly tariffs — affect the economy. Fed Chair Jerome Powell said earlier this week that the central bank's path on monetary policy would be dependent on data, and that a rise in either inflation or unemployment could guide the interest-rate path going forward.

But the June report contradicts President Donald Trump's call to lower rates, and he has berated Powell to do so over the past few months, including a handwritten note on Monday.

"Jerome, you are, as usual, too late. You have cost the USA a fortune and continue to do so," White House press secretary Karoline Leavitt said Monday, reading Trump's note. "You should lower the rate by a lot. Hundreds of billions of dollars are being lost and there is no inflation."

In a separate post on Truth Social on Monday, Trump said Powell and his colleagues on the Fed's board of governors "should be ashamed of themselves" for costing the country "trillions of dollars in interest cost."

Two members of the Federal Reserve Board — Fed Vice Chair for Supervision Michelle Bowman and Gov. Christopher Waller — said they support a rate cut as soon as this month as well. 

"I think it is likely that the impact of tariffs on inflation may take longer, be more delayed and have a smaller effect than initially expected, especially because many firms front-loaded their stocks of inventories," Bowman said last week. "As we think about the path forward, it is time to consider adjusting the policy rate."

But Powell has stayed firm against Trump's attacks and said the Fed would have likely cut rates this year already had it not been for Trump's tariff policies, which were rolled out on April 2 and put on a 90-day pause through July 9.

"We went on hold when we saw the size of the tariffs and when essentially all inflation forecasts for the United States went up materially as a consequence of the tariffs," Powell said Tuesday. "So we didn't overreact. In fact, we didn't react at all. We're simply taking some time, as long as the U.S. economy is in solid shape, we think the prudent thing to do is to wait and learn more and see what those effects might be."