A stronger-than-expected US jobs report for June has pushed back expectations of a Federal Reserve rate cut this summer, as the labour market continues to show resilience despite broader economic concerns and tariff tensions.
The US economy added 147,000 jobs in June, significantly above forecasts and recent averages, while the unemployment rate dipped to 4.1%. The figures were a welcome surprise for markets, especially after private payrolls data earlier in the week hinted at the first job losses in over two years, raising fears the labour market might be losing steam. For many investors and economists, the latest report offers further evidence that the US labour market remains in good health.
“As has been a theme for some time now, the US economy continues to confound expectations,” said Lindsay James, investment strategist at wealth manager Quilter. She noted that the labour market’s strength comes despite negative GDP growth in Q1 and mounting concerns over the pricing effects of the US tariff regime. “For now, this seems to be far from the case,” she added.
The job data may offer the Federal Reserve the breathing room it needs to hold interest rates steady at its upcoming July meeting. “Ultimately, this gives Jerome Powell and the Federal Reserve the cover it will want to hold rates,” said James. “Prior to this data, the market had a 25% chance of a rate cut in July… this now stands at close to 5%.”
George Brown, senior economist at Schroders, echoed that sentiment, sharing “for all the tariff turmoil, the US labour market remains remarkably resilient.” He pointed to persistently low layoff levels and lingering labour shortages as key supports. “Companies remain hesitant to let go of workers, especially after recent years of difficulty in hiring. That may lower the breakeven pace of job creation needed to keep unemployment stable,” Brown explained.
US job surge shifts focus to fixed income
Janet Mui, head of market analysis at RBC Brewin Dolphin, described the report as a “Goldilocks” outcome — not too hot, not too cold — offering reassurance that the labour market is quite stable. She highlighted that, despite the job gains, wage growth has eased, which should keep inflation in check. “Overall, the data suggests a gently slowing but solid jobs market, with inflation-friendly wage data,” Mui said. “So, the bet of a July rate cut is off the table after this report.”
However, the commentators warned that risks remain. With reciprocal tariffs set to resume and the Trump administration’s stance on immigration limiting labour supply, pressure could begin to mount in certain sectors. Mui noted that “companies may struggle to find the right worker” due to the shrinking immigrant workforce, which contributed significantly to job creation post-pandemic.
Brown added that the impact of tariffs is expected to feed through to higher prices over the summer. “With the Fed focused on not falling behind the curve again, our base case remains that it will keep rates on hold for the rest of the year,” he said.
Adding to the hawkish tone, Nigel Green, CEO of deVere Group, called the jobs report a game-changer, warning investors to act swiftly. “This report changes everything,” Green said, highlighting persistent wage pressures and the strength of the labour market. He argued that “the case for a rate cut is evaporating,” as Treasury yields and the dollar surged on the data. Green cautioned that investors still banking on a September pivot are ignoring clear evidence: “This is not what a softening economy looks like. This is strength—and that’s not what the Fed needs to fix.” He urged clients to reassess exposure to risk-sensitive assets, warning of a more volatile second half. “The assumption that central banks will start cutting in sync is looking outdated,” he added, noting that the US economy’s outperformance gives the Fed no reason to rush. “September is no longer a certainty. It’s up in the air—and that uncertainty demands action sooner rather than later.”
While political pressure on the Fed is increasing, particularly from the Trump campaign, Powell has remained non-committal. For now, the resilience of the labour market supports his stance. As James concluded: “With the jobs report continuing to indicate things are okay, and potentially even better than hoped for… the Fed can keep calm and carry on.”
