Trump’s trade war shakes up hiring decisions

The United States added 147,000 jobs in June, blowing past forecasts as public schools went on a hiring spree while most other industries dragged. The new employment data, released Thursday by the Bureau of Labor Statistics, showed a drop in the unemployment rate to 4.1%, with fewer people out of work and fewer actively looking.

But the celebration ends there. Once you cut out the surge in state and local government hiring, what’s left is a weak private sector that only added 74,000 jobs, the lowest number since October.

Private hiring barely held up, and nearly all of it came from health care, which added 59,000 positions—also its weakest gain in four months. Meanwhile, manufacturing, wholesale trade, and business services actually cut workers.

Leisure and hospitality picked up 20,000 jobs, but that number was wiped out by a downward revision to May’s total. The slowdown in private hiring came while Donald Trump, now back in the White House, is pushing for tax cuts that Congress still hasn’t approved. On top of that, employers are still trying to make sense of Trump’s chaotic trade policy.

Trump’s trade war shakes up hiring decisions

Wall Street immediately reacted. Samuel Tombs, chief economist at Pantheon Macroeconomics, said employers are pulling back hard. “Ignore the boost from education jobs; private demand for labor is slowing,” he wrote. He blamed the slowdown on Trump’s tariff tax hikes, tight monetary conditions, and growing fears that the trade war is about to get worse.

Financial markets moved fast. Treasury yields and the dollar rose, while the S&P 500 opened higher, as investors realized the jobs numbers give the Federal Reserve more time to hold off on cutting rates.

The jobs report was built from two separate surveys: one of employers, one of households. It showed fewer unemployed people for the first time in five months. But the labor force participation rate, the percentage of people working or looking for work, slipped. That means people are either finding work or giving up.

Joe Gaffoglio, CEO of Mutual of America Capital Management, said the labor market is holding up even as manufacturing lags. He also pointed out that real average hourly earnings just logged their biggest increase all year. But Ian Lyngen, who runs US rates strategy at BMO, said this won’t push the Fed to act this month. Rate cut expectations, he said, are now focused on the September meeting.

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Jeffrey Roach, chief economist at LPL Financial, said businesses still seem willing to expand, even with the noise around tariffs. He said that’s why the Fed can afford to wait. But Simon Dangoor, who heads macro strategies at Goldman Sachs Asset Management, warned that while the labor market looks steady for now, it may not last. He said the Fed might still go back to easing policy later this year if inflation doesn’t pick up.

Allison Schrager, a senior fellow at the Manhattan Institute, said the economy’s been beating expectations even though everyone’s waiting for things to slow down. “It’s not just this employment report; it was also JOLTS. It’s also inflation. And for right now, the economy looks pretty strong,” she said in an interview.

Eric Merlis, co-head of global markets at Citizens, said the labor market held together in June, despite geopolitical worries and tariff issues. Wages stayed flat and didn’t push any inflation alarms. That means the Fed can keep watching and waiting.

Jeff Schulze, who leads market strategy at ClearBridge Investments, said the June report slammed the door shut on any rate cut in July. He pointed to three positives: more jobs, a lower unemployment rate, and revised gains from the last two months. He also said wage growth stayed soft, so inflation isn’t a problem yet.

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