The economy again beat expectations in June and added 147,000 jobs, an encouraging sign that the labor market is holding up while entering the second half of the year.
The unemployment rate fell slightly to 4.2%, the Bureau of Labor Statistics reported Thursday.
Investors expected roughly 120,000 new jobs and the unemployment rate to tick up a tenth of a percentage point to 4.3%.
The report is welcome news for President Donald Trump. There were concerns that the higher tariffs Trump campaigned on could filter through the economy and cause a recession or job loss.
“President Trump is probably saying, ‘Look, you know my tariffs haven’t affected the economy at all, the economy is great,’ and J Powell is sitting there saying, ‘I told you so, I don’t need to cut rates right now,’” Dan North, a senior economist with Allianz Trade Americas, told the Washington Examiner.
The report is also good news for the Federal Reserve, which has held off on lowering interest rates to ensure the country’s bout of too-high inflation is finally vanquished. The Fed is working to thread the needle on staving off inflation while avoiding damage to the labor market.
There have been lingering concerns about the overall health of the economy, and job numbers have been revised down in recent months, although employment has managed to stay above water.
Notably, investors have also expressed some confidence in the economy. After notching big losses earlier in the year, given fears about tariffs, the stock market has rebounded, and the S&P 500 closed at a record high this week.
Economic growth earlier in the year was also concerning. GDP contracted at an annual rate of 0.5% in the first quarter, further fueling fears of an economic slowdown or a recession.
But since then, GDP growth has likely expanded in the second quarter. The Atlanta Fed’s “GDPNow” tracker predicts GDP growth in the second quarter will grow by a strong 2.5%, according to the latest estimate.
It is complicated to gauge when recessions begin and end, but those in the government and most economists look to the National Bureau of Economic Research, a private group, to declare one.
NBER defines a recession as “a significant decline in economic activity that is spread across the economy and that lasts more than a few months,” although there is a historical precedent of labeling two consecutive quarters of negative economic growth recessionary. The periods feature rising unemployment.
Continued expansionary employment reports coupled with strong GDP growth signal that a recession is not imminent for now.
During the 2024 presidential race, inflation was the biggest economic matter facing voters. Inflation exploded under former President Joe Biden and reached its highest level in decades, fueling voter discontent and helping Trump sweep into office.
Annual inflation has declined, although it is slightly higher than the Fed’s 2% target.
Inflation rose a tenth of a percentage point to 2.3% for the year ending in May, the Bureau of Economic Analysis reported in a recent update to the personal consumption expenditures index, the metric favored by the Fed.
Inflation, as gauged by the more closely watched consumer price index, is running at 2.4%.
Fed Chairman Jerome Powell has faced massive blowback from Trump and his administration over the Federal Open Market Committee’s decision not to cut interest rates. After its most recent meeting in June, the Fed announced it would again hold its rate target at 4.25% to 4.50%.
Trump has dubbed the Fed chief “Too Late Powell” for his unwillingness to start slashing interest rates and has summoned him to the White House to push for lower rates. But Powell has remained steadfast in his view that the Fed should remain independent from pressure from the White House.
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There was concern in the Fed that the Trump tariffs could cause prices to tick up and put further pressure on inflation, one of the factors behind the calculus of holding rates steady. Powell has suggested that rates might have been cut had Trump not embarked on such an aggressive tariff push.
“In effect, we went on hold when we saw the size of the tariffs, and essentially all inflation forecasts for the United States went up materially as a consequence of the tariffs,” Powell said during a panel at the European Central Bank forum this week.
