A strong jobs report boosted optimism about the US economy and helped to lift the benchmark S&P 500 index of leading shares and the technology-focused Nasdaq to record highs.
Employment data from the Department of Labor showed that 147,000 new roles were created in the private sector and government agencies in June, well above expectations for 110,000.
The unemployment rate fell unexpectedly from 4.2 to 4.1 per cent. Average hourly earnings were up 0.2 per cent month-on-month.
Fears of the end of US exceptionalism are fading in America as the effects of President Trump’s tariffs on inflation and jobs have so far been less bad than feared.
John Waldron, president of Goldman Sachs, said the US economy was “surprisingly resilient”, both in terms of consumer spending and the jobs market. He said that general economic activity was “stronger” than “one might have guessed if we were sitting here on April 3, projecting what the tariff policy would deliver”.
He said that Europe was “sluggish” compared with the US, with optimism “not anywhere near as strong on the ground”. China felt “very sluggish”, he added, and there were “real concerns” about deflationary pressures on the Chinese economy.
Trump announced sweeping tariffs on US imports in April and prompted a sell-off in riskier assets that led to a rout in the S&P 500 as Wall Street economists said the trade policy could push inflation to levels seen during the pandemic, increase the unemployment rate, and lead to a US recession this year.
However, the American economy has remained resilient and investors have so far shrugged off fears about the looming end of Trump’s 90-day tariff pause on July 9.
Responding to the jobs figures, Trump shared a quote from the CNN anchor Matt Egan: “This jobs market is like the Energizer Bunny. Every time we expect it to run out of steam, it just keeps going.”
The S&P 500 closed up 0.8 per cent at 6,279.35, its seventh record close of the year while the Nasdaq Composite rose 1 per cent, to 20,601.10, its fourth new high of the year so far.
Nvidia’s market capitalisation neared $4 trillion as the chipmaker closed up 2.6 per cent at $159.34.
Expectations that the Fed will cut the borrowing rate next month sank from 24 per cent to just 5 per cent after the latest non-farm payroll figures were released. The odds of a cut being announced at the September meeting also fell, from 78 to 64 per cent, according to the CME Fedwatch tool.
The Fed last cut interest rates in December, and has since stayed in a holding pattern citing uncertainty generated by the White House’s trade policy and fears about rising inflation. This has led Trump to attack Jerome Powell, the central bank’s chairman, calling him a “fool” and a “numbskull” last week.
Wall Street analysts were united in agreement that anyone agitating for the Fed to reduce rates from the current 4.25 to 4.5 per cent range at its next meeting on July 30 would be disappointed.
Isaac Stell, at Wealth Club, said such hopes had “all but disappeared”. Janet Mui, at RBC Brewin Dolphin, said that bet was “off the table”.
Lindsay James, at Quilter, added: “Donald Trump is getting more vocal, and indeed vociferous, in his criticism of the Fed and its interest rate policy. For now, though, Jerome Powell will feel vindicated.”