New York, July 3 EST: The U.S. economy added 147,000 jobs in June, handily beating estimates. That alone would seem to take the Federal Reserve off the hook for a rate cut this month. But the details undercut the headline: more than half of those jobs came from government payrolls, particularly in education and healthcare. The private sector added just 74,000 jobs—a soft number that doesn’t suggest strong business appetite for expansion.
The unemployment rate fell to 4.1%, which looks good at first glance. But the labor force participation rate dipped again, hitting 62.3%, the lowest since 2022. That drop wasn’t driven by retirements—it’s tied to fewer foreign-born workers in the market, which adds pressure to hiring and keeps some wage inflation alive.
A July Cut? Highly Unlikely
With the labor market still stable and wage growth continuing to ease, the Fed has no reason to rush. Odds of a July rate cut have collapsed—from about 1 in 4 to just 5%, according to Investors Business Daily.
That shifts the focus to September, which now becomes the earliest plausible window for a move—assuming inflation data softens further and private hiring doesn’t rebound.
Fed officials aren’t showing urgency. Atlanta Fed President Raphael Bostic said last week it could take “a year or more” for the economy to fully absorb the effects of new tariffs. Translation: we’re staying patient. Richmond Fed President Thomas Barkin echoed that sentiment, pointing to lingering inflation risks tied to trade policy and emphasizing a wait-and-see stance.
Private-Sector Weakness Is the Real Tell
The public sector is still hiring, but that’s not the part of the economy exposed to profit cycles or cost of capital. The private sector’s modest job gains suggest companies are delaying hiring and capex decisions until there’s more clarity on tariffs and demand.
That restraint isn’t just theory. From industrial suppliers to consumer tech, companies are either trimming headcount or slowing the pace of new hires. And for many CFOs, hiring now is a bigger gamble than waiting out the fall.
Meanwhile, wage growth continues to cool—good news for the inflation outlook, but also a sign that workers may have less pricing power going forward. That makes it easier for the Fed to wait, not act.
What’s Next
Markets are already repositioning. Treasury yields are inching up, and dollar strength suggests fewer are betting on near-term easing.
The next few months will be about confirming the trend: if private hiring stays soft, inflation ticks down, and consumer spending holds, the Fed could step in with a modest cut by fall. But this isn’t 2023’s aggressive pivot cycle—it’s more like fine-tuning the brakes, not slamming them.
The Fed’s message is clear: there’s no panic. And unless the numbers turn fast, there’s no pivot either.
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A Wall Street veteran turned investigative journalist, Marcus brings over two decades of financial insight into boardrooms, IPOs, corporate chess games, and economic undercurrents. Known for asking uncomfortable questions in comfortable suits.
