U.S. job gains beat forecasts. Chances of an imminent rate cut have fallen
US stock market hits new records after statistics publication

The number of jobs in the US in June unexpectedly increased stronger than market participants expected, and the unemployment rate fell. The strong labor market is an obstacle to lower interest rates, which may give the Fed a reason to delay its resumption until at least September. Major U.S. stock indices hit new records after the opening of trading on July 3.
Details
The number of U.S. jobs outside the agricultural sector increased by 147,000 in June, the Bureau of Labor Statistics reported. Jobs were strong last month in public administration and health care, while federal government jobs, on the other hand, continued to decline. The unemployment rate unexpectedly fell to 4.1% - after 4.2% in May. Both indicators were better than economists' expectations. In the first case, experts predicted 110,000 jobs, and in the second - an increase in unemployment to 4.3%, notes CNBC with reference to Dow Jones data.
The Labor Department report came a day after the publication of the monthly ADP report on employment in the U.S. private sector: in June, the number of jobs in it decreased by 33 thousand, writes CNBC. These figures have raised fears that the economy has begun to lose resilience amid sharp changes in policy. However, the official government statistics does not confirm this, the channel noted.
Markets reacted to the report that exceeded forecasts with growth to new records. The main U.S. stock indices - S&P 500, Nasdaq 100 and Dow Jones - added about 0.7-0.9% each after the opening of trading on July 3. The S&P 500 and Nasdaq Composite reached new all-time highs. U.S. government bond yields rose sharply, CNBC adds. Trading on Thursday will be shortened, with the New York Stock Exchange and Nasdaq closing at 1 p.m. ET. U.S. markets will be off on Friday due to Independence Day.
How this could affect the stakes
Better-than-expected data point to a resilient labor market, which could prompt the Federal Reserve to delay a return to interest rate cuts until September, передает Reuters.
"The labor market is once again beating expectations, showing not just stability but real strength. It may be time to stop calling it a surprise and recognize that it is indeed stable," Karen Manna, investment director and portfolio manager at Federated Hermes, told CNBC in a statement. - Markets may begin to reassess what's happening amid this dynamic. With events coming up that could narrow the range of possible scenarios, the fog of uncertainty is beginning to dissipate."
In June, the Fed left the key rate unchanged at 4.25-4.5%, where it has been since December 2024. Fed Chairman Jerome Powell on Tuesday, July 1, reiterated that the regulator prefers to wait and get more data on the impact of duties on inflation before deciding on a rate cut. The picture should become clearer once inflation data for the summer months is available, he said. Meanwhile, the July inflation figure won't be available until the Fed's September meeting, wrote Bloomberg.
After the publication of statistics, traders have reduced expectations for easing the Fed's policy. Thus, according to the CME FedWatch tool, less than 5% of market participants now expect a rate cut at the Fed's July meeting - down from 18.6% after Powell's report to Congress last week. However, most analysts believe unemployment will gradually rise in the second half of the year, which could prompt the Fed to return to cutting rates in September, Reuters emphasizes. Nearly 74% of traders are counting on rate easing following that month's meeting, CME FedWatch shows.
What about inflation
"The Fed's favorite indicator" inflation - the core consumer spending index (PCE), which excludes volatile food and energy prices, was above economists' forecasts in May: 0.2% versus 0.1%. But the personal consumption expenditures (PCE) index coincided with expectations: it added 0.1% compared to April and 2.3% in annual terms. The Fed's inflation target is 2%.
This article was AI-translated and verified by a human editor