Signs of a slowdown in the US labor market began to be felt more clearly in June. According to economists' expectations, it is estimated that 110,000 jobs were created in the country in June. This figure falls short of the 139,000 increase in May, while the unemployment rate is expected to rise from 4.2% to 4.3%. This rate will mark the highest level since October 2021.
Although this weakening in employment does not directly indicate a crisis, there are increasing signs of a “gradual cooling” in the job market. Fed Chairman Jerome Powell also confirmed this picture in his speech, which began at 4:30 p.m. today.
Powell: Interest rate cuts may come this year
Fed Chairman Powell stated in his speech that the overall outlook for the US economy is good and that inflation continues to decline. However, the key point was the uncertainty surrounding trade policies and the impact of tariffs on monetary policy.
Powell said, “The US economy is in good shape and inflation continues to decline. If we set tariffs aside, we can say that inflation is moving in the direction we targeted.”
Even more striking were his comments on interest rate policy. When asked, “Would you have cut rates if there were no tariffs?” Powell replied, “Yes, we would have.” He also defended the Fed's cautious stance, saying, “When the tariff discussions began, we thought it was right to wait.”
Powell also noted that the majority of FOMC members believe that an interest rate cut would be appropriate toward the end of this year, adding that no meeting is “off the table” in terms of interest rate cuts and that decisions will be shaped by incoming data.
When asked, “Is an interest rate cut in July too early?” Powell avoided giving a direct answer, saying, "I can't say whether July is too early for an interest rate cut. I am not taking any meeting off the agenda."
S&P manufacturing data exceeded expectations
While cooling in the labor market and expectations of interest rate cuts remained on the agenda, the latest PMI data from the US continued to produce mixed signals for the economy. The Manufacturing PMI data released by S&P Global rose from 52.0 in June to 52.9, exceeding expectations. This data points to expansion in the manufacturing sector, but when read alongside employment data, it paints an uneven but resilient economic picture.
Uncertainty persists
June data points to a controlled slowdown rather than a rapid contraction in the labor market. On the Fed front, the idea of interest rate cuts is now being voiced more loudly. In particular, Powell's statements clearly expressing the impact of tariffs on monetary policy have brought the possibility of an interest rate cut in the fall seriously to the fore.
The official non-farm payroll data to be released on Thursday will play a critical role in the trajectory of this process. Markets are preparing to make new price adjustments based on the Fed's “data-dependent” stance.
