Good morning! I hope you had a great Independence Day.

This morning, the Bureau of Labor Statistics will release fresh employment data for June. That — plus Wednesday’s ADP employment report — will play into the Fed’s calculus as it determines when or if to cut interest rates this year.

Today’s edition is your labor market primer.

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All about June jobs

The labor market has looked like the most resilient part of the economy for the better part of two years. 

It’s held up better than expected so far against the Fed’s high interest rates, which has kept the Goldilocks soft-landing scenario alive.

With inflation seemingly going in the right direction, the payroll report has become the most important input for the Fed. 

At 8:30 a.m. ET Friday, the Bureau of Labor Statistics (BLS) will publish June payroll data. 

Consensus estimates forecast the US added 190,000 nonfarm jobs last month, per FactSet, lower than the 272,000 seen in May. Economists then see the unemployment rate staying unchanged at 4.0%. 

If that estimate holds, it would mark 31 months in a row the unemployment rate has been at that level or below.

Yet Gene Goldman, the chief investment officer of Cetera Investment Management, says he expects a lower payroll reading than consensus for three reasons:

1. Weak manufacturing data suggests broad economic cooling

2. Recent jobless claims and continuing claims have already come in softer than expected

3. High interest rates are slowing the services industry, as measured by the ISM services index, and that sector is a big part of employment 

“If the payroll report confirms labor market weakness and wage growth continues slowing, this should increase odds of a Fed rate cut this year,” Goldman said.

“To that effect, this week’s release of the Fed’s June FOMC minutes had multiple references that Fed officials are watching for signals of labor market weakness.”

Earlier this week, ADP reported 150,000 private-sector jobs were created in June, which would mark the smallest gain in five months.

And according to BLS data, there are now 1.2 jobs per unemployed worker, the lowest since June 2021.

That ratio hit a record 2.0 in March 2022. 

Meanwhile, Guy Berger, the director of economic research at the Burning Glass Institute, observed that the “Great Resignation” has turned into the “Great Stay” — the pace of hiring and quits are moderating, but layoffs are not spiking. 

If we take all of the above at face value, the story is largely one of economic resilience. 

Even with tight monetary policy, jobs growth and unemployment have yet to weaken by a meaningful degree. 

Then again, jobs data has been revised more often than not over the last couple years. 

Plus, it was only last month Bloomberg economists published a scathing write-up that suggested the labor market has crumbled way more than policymakers think. 

The government numbers, according to the report, could be overstating US employment by 1 million people this year.

Bloomberg chief economist Anna Wong estimated that the true pace of job growth is below 100,000 a month — less than half the official 242,000, as measured by the three-month average up to June. 

In any case, Goldman remains optimistic for rate cuts this year.

Core PCE is nearing the Fed’s 2 percent inflation target and consumers are showing signs of pain with high interest rates. 

A worst-case scenario jobs report for the Fed, he added, would be a sharp drop in employment and a rise in the unemployment rate.

A reversal in the recent decline in average hourly earnings, too, would put pressure on the central bank.

“This would suggest that the Fed has held rates too high for too long and stagflation becomes a real concern,” Goldman said.

Thoughts or feedback? Hit reply to this email or let me know on X @philrosenn.

*At a glance:

Elsewhere:

📊The Trump trade is back. Biden’s poor showing at the debate led to a sell-off in US bonds, as traders bet on tax-friendly policies and a bigger deficit. Generally, markets tend to expect more government debt when one party sweeps. Higher bond yields also seem to be pricing in Trump tax cuts and tariffs. (WSJ)

🪙Bitcoin has pulled back over recent days. It’s hovering near prices last seen in February, and other cryptocurrencies have also tumbled. Wild US politics have created uncertainty for digital assets, and the German government also is weighing what to do with seized bitcoin. (Bloomberg)

🏦Is America saving enough for retirement? Research from Vanguard suggests it’s not time to sound the alarm just yet. Retirement savings have soared, as people are setting aside funds at the highest rates ever. Automatic savings features, too, have helped boost retirement funds over recent years. (Yahoo Finance)

Rapid-fire:

• The US dollar has surged — and traveling tourists are taking advantage of it (WSJ)

• Oil prices hover at a two-month high as the US stockpile declines (Bloomberg)

• Active bond ETFs have surged in popularity and look on track for $1 trillion of inflows this year (FT)

• Broad AI adoption will push America’s shaky power grid to its limits (Business Insider)

• Saks Fifth Avenue parent HBC will acquire Neiman Marcus in a $2.65 billion deal (CNBC)

Last thing:

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