The alarm bells for the US job market are ringing! The June non-farm data may expose economic concerns, and the Fed's interest rate cut will add another variable
2025-07-03 13:52:01
As the global economic environment becomes more complex and volatile, the U.S. labor market faces a new test in June 2025. Affected by the economic uncertainty caused by the Trump administration's policies, corporate hiring has slowed significantly and the labor market has shown signs of weakness. According to the latest Reuters survey, the market expects non-farm payrolls to increase by only 110,000 in June and the unemployment rate to climb to 4.3%, the highest level in three and a half years. At the same time, wage growth remains stable, but economists have expressed concerns about future employment trends. Will this weak employment performance be enough to push the Federal Reserve to resume rate cuts in July? The answer is still unclear, but the market has begun to prepare for a potential policy shift. Due to the July 4th Independence Day holiday, the Labor Department will release the highly anticipated June employment report in advance on Thursday, providing more clues for investors and policymakers.
Trump's policies trigger chain reactions
Since Trump was re-elected as the US president, his policy proposals have had a profound impact on the economy. Anti-growth policies, including high tariffs on imported goods, large-scale deportations of immigrants, and drastic cuts in government spending, have not only changed the trajectory of corporate and consumer confidence, but have also directly suppressed corporate recruitment activities. After Trump's victory in November last year, the market was once full of confidence due to the expectation of tax cuts and deregulation, but this optimism quickly faded after just two months. Martha Gimbel, executive director of the Yale Budget Lab, said frankly: "This is a period of uncertainty, and it is difficult for business owners and consumers to make long-term decisions." This uncertainty is directly reflected in the non-farm payrolls data in June, with an estimated 110,000 new jobs, down from 139,000 in May and an average of 135,000 in the past three months.
Slow response from small businesses affects data
Economists pointed out that the weakness in June's employment data may be partly due to delayed responses from small businesses in institutional surveys. Non-farm payrolls are based on these surveys, and this year's data revisions are generally biased downward. Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics, said: "Whatever the reason for the data revision, the initial value of new jobs in June may need to be adjusted down by about 30,000. Investors should pay more attention to long-term trends rather than fluctuations in a single month." This trend of data revisions has further exacerbated market concerns about slowing job growth.
Unemployment rate could reach 3.5-year high
According to a Reuters survey of economists, the unemployment rate is expected to rise to 4.3% in June from 4.2%, reaching its highest level since October 2021. Although layoffs remain low overall, layoffs have increased recently, and the slowdown in hiring has reduced the chances of re-employment for the unemployed. This has not only pushed up unemployment expectations, but also led economists to predict that the unemployment rate may continue to rise in the second half of 2025. James Knightley, chief international economist at ING, said: "The changes in the job market have been more severe than expected. The June data may not be enough to prompt a rate cut in July, but the Fed may need to pay closer attention to employment trends."
Impact of immigration policy on the labor market <br/>The Trump administration recently revoked the temporary legal status of hundreds of thousands of immigrants, a policy that has directly led to a shrinking labor force. Some economists believe that this may limit the room for unemployment to rise. They estimate that the US economy only needs to add less than 100,000 jobs per month to maintain a stable unemployment rate. However, the uncertainty of immigration policy has already had a significant impact on specific industries. For example, the leisure and hotel industry may be suppressed in new jobs because some immigrants have reduced their outings due to concerns about deportation. The construction and manufacturing industries are also facing the challenge of slowing job growth due to similar concerns and tariff pressures.
Wage growth remains stable
Despite the slowdown in job growth, average hourly earnings are expected to increase by 0.3% month-on-month in June, down from 0.4% in May, but the annual wage growth rate will remain stable at 3.9%. This shows that companies still maintain a certain degree of competitiveness in terms of wages, but as economic uncertainty increases, the sustainability of future wage growth remains to be seen. Economists estimate that the U.S. economy needs to add 100,000 to 170,000 jobs per month to keep up with the growth of the working-age population, and the expected increase in June is at the lower end of this range.
Industry performance is clearly differentiated
From an industry perspective, the healthcare industry is expected to continue to play an important role in job growth in June, maintaining its usual strong performance. However, job growth in the leisure and hospitality industry, construction industry, and manufacturing industry may be dragged down by policies and tariffs. On the federal government side, recent moves to significantly reduce federal employees have triggered legal disputes, which may lead to continued small layoffs in government departments, further adding pressure to the job market.
The Fed is cautiously watching
The Fed kept its benchmark interest rate unchanged at 4.25%-4.50% in June, and Chairman Powell made it clear that the central bank will closely monitor the potential impact of tariff policies on inflation before deciding whether to adjust interest rates. The current weak performance of the job market has not yet reached the level that triggers a rate cut in July, but if the unemployment rate continues to rise, the Fed may restart the easing policy cycle in September. Knightley pointed out: "The shadow of the job market is widening, and the Fed may need to reassess its policy stance."
Long-term trends draw attention
Although the June employment data may not be satisfactory, economists generally believe that the current labor market remains resilient. Low layoff rates and companies' employee retention strategies after the epidemic provide a certain buffer for the market. However, as policy uncertainty continues to ferment, small businesses' willingness to recruit declines, and immigration policies restrict labor supply, future employment growth may face greater challenges. Investors and policymakers need to pay close attention to the revisions to the April and May data, as well as the industry trends that may be revealed in the June report.
The performance of the U.S. job market in June has undoubtedly sounded the alarm for the economy. The decline in new jobs, the rise in unemployment, and the suppression of recruitment activities by policy uncertainty all indicate that the labor market is going through a difficult period. Although wage growth and the resilience of some industries have provided some support to the market, factors such as immigration policies, tariff pressures, and government layoffs are casting a shadow on the employment outlook. The Federal Reserve will face more complex considerations in formulating monetary policy, and investors need to look for more clues about the direction of the economy from the June employment report. In this period of uncertainty, every signal from the U.S. labor market deserves close attention.
Economic uncertainty weighs on hiring enthusiasm
Trump's policies trigger chain reactions
Since Trump was re-elected as the US president, his policy proposals have had a profound impact on the economy. Anti-growth policies, including high tariffs on imported goods, large-scale deportations of immigrants, and drastic cuts in government spending, have not only changed the trajectory of corporate and consumer confidence, but have also directly suppressed corporate recruitment activities. After Trump's victory in November last year, the market was once full of confidence due to the expectation of tax cuts and deregulation, but this optimism quickly faded after just two months. Martha Gimbel, executive director of the Yale Budget Lab, said frankly: "This is a period of uncertainty, and it is difficult for business owners and consumers to make long-term decisions." This uncertainty is directly reflected in the non-farm payrolls data in June, with an estimated 110,000 new jobs, down from 139,000 in May and an average of 135,000 in the past three months.
Slow response from small businesses affects data
Economists pointed out that the weakness in June's employment data may be partly due to delayed responses from small businesses in institutional surveys. Non-farm payrolls are based on these surveys, and this year's data revisions are generally biased downward. Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics, said: "Whatever the reason for the data revision, the initial value of new jobs in June may need to be adjusted down by about 30,000. Investors should pay more attention to long-term trends rather than fluctuations in a single month." This trend of data revisions has further exacerbated market concerns about slowing job growth.
Rising unemployment rate and pressure to lay off employees
Unemployment rate could reach 3.5-year high
According to a Reuters survey of economists, the unemployment rate is expected to rise to 4.3% in June from 4.2%, reaching its highest level since October 2021. Although layoffs remain low overall, layoffs have increased recently, and the slowdown in hiring has reduced the chances of re-employment for the unemployed. This has not only pushed up unemployment expectations, but also led economists to predict that the unemployment rate may continue to rise in the second half of 2025. James Knightley, chief international economist at ING, said: "The changes in the job market have been more severe than expected. The June data may not be enough to prompt a rate cut in July, but the Fed may need to pay closer attention to employment trends."
Impact of immigration policy on the labor market <br/>The Trump administration recently revoked the temporary legal status of hundreds of thousands of immigrants, a policy that has directly led to a shrinking labor force. Some economists believe that this may limit the room for unemployment to rise. They estimate that the US economy only needs to add less than 100,000 jobs per month to maintain a stable unemployment rate. However, the uncertainty of immigration policy has already had a significant impact on specific industries. For example, the leisure and hotel industry may be suppressed in new jobs because some immigrants have reduced their outings due to concerns about deportation. The construction and manufacturing industries are also facing the challenge of slowing job growth due to similar concerns and tariff pressures.
Wage growth is steady but the outlook is uncertain
Wage growth remains stable
Despite the slowdown in job growth, average hourly earnings are expected to increase by 0.3% month-on-month in June, down from 0.4% in May, but the annual wage growth rate will remain stable at 3.9%. This shows that companies still maintain a certain degree of competitiveness in terms of wages, but as economic uncertainty increases, the sustainability of future wage growth remains to be seen. Economists estimate that the U.S. economy needs to add 100,000 to 170,000 jobs per month to keep up with the growth of the working-age population, and the expected increase in June is at the lower end of this range.
Industry performance is clearly differentiated
From an industry perspective, the healthcare industry is expected to continue to play an important role in job growth in June, maintaining its usual strong performance. However, job growth in the leisure and hospitality industry, construction industry, and manufacturing industry may be dragged down by policies and tariffs. On the federal government side, recent moves to significantly reduce federal employees have triggered legal disputes, which may lead to continued small layoffs in government departments, further adding pressure to the job market.
Federal Reserve Policy Outlook and Market Outlook
The Fed is cautiously watching
The Fed kept its benchmark interest rate unchanged at 4.25%-4.50% in June, and Chairman Powell made it clear that the central bank will closely monitor the potential impact of tariff policies on inflation before deciding whether to adjust interest rates. The current weak performance of the job market has not yet reached the level that triggers a rate cut in July, but if the unemployment rate continues to rise, the Fed may restart the easing policy cycle in September. Knightley pointed out: "The shadow of the job market is widening, and the Fed may need to reassess its policy stance."
Long-term trends draw attention
Although the June employment data may not be satisfactory, economists generally believe that the current labor market remains resilient. Low layoff rates and companies' employee retention strategies after the epidemic provide a certain buffer for the market. However, as policy uncertainty continues to ferment, small businesses' willingness to recruit declines, and immigration policies restrict labor supply, future employment growth may face greater challenges. Investors and policymakers need to pay close attention to the revisions to the April and May data, as well as the industry trends that may be revealed in the June report.
Summary: Job market signals cannot be ignored
The performance of the U.S. job market in June has undoubtedly sounded the alarm for the economy. The decline in new jobs, the rise in unemployment, and the suppression of recruitment activities by policy uncertainty all indicate that the labor market is going through a difficult period. Although wage growth and the resilience of some industries have provided some support to the market, factors such as immigration policies, tariff pressures, and government layoffs are casting a shadow on the employment outlook. The Federal Reserve will face more complex considerations in formulating monetary policy, and investors need to look for more clues about the direction of the economy from the June employment report. In this period of uncertainty, every signal from the U.S. labor market deserves close attention.
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