US adds 147,000 jobs in June, surpassing expectations amid Trump trade war
The number of jobs added surpassed expectations, as economists largely anticipated a drop in openings. Instead, 3,000 more jobs were added in June compared with May, according to new job figures from the Bureau of Labor Statistics (BLS). The unemployment rate actually decreased to 4.1%, down from 4.2% in May.
Job gains were seen in state government and healthcare, which saw increases of 47,000 and 39,000 jobs, respectively. Meanwhile, federal government job losses continued, with another 7,000 roles down in June, as the Trump administration continues to cut jobs. The total job loss in the federal government has been 69,000 since January.
Though the president's tariffs have rocked the US stock market, which has seen a dramatic rebound after dipping down 15% in the spring, economists have been worrying that the labor market has just been slower to show sensitivity to the tariffs.
New data had shown employers showing signs of hesitancy. The payroll firm ADP found that the private sector lost 33,000 jobs in June, far below the 100,000 increase that was expected, and the first decrease since March 2023.
The dip in job openings does no necessarily mean companies are laying off more workers; rather, they are creating fewer new positions.
'Though layoffs continue to be rare, a hesitancy to hire and a reluctance to replace departing workers led to job losses last month,' said Nela Richardson, chief economist at ADP, in a statement.
John Waldron, president of Goldman Sachs, said the American economy was 'breaking more to the positive' than many expected after Trump unveiled sweeping tariffs in early April.
'The US economy is surprisingly resilient, both in terms of consumer spend [and] the labor dynamic,' Waldron told reporters on Thursday. 'And just general economic economic activity is stronger than one might have guessed if you were sitting here on April 3, projecting what the tariff policy would deliver.'
Data from BLS that measures job openings and turnovers in the labor market found that while job openings had climbed in May, to its highest level since November, the vast majority of openings were concentrated in the leisure and hospitality industry. Economists with Citigroup said the spike in new jobs could be temporary as companies opened new positions in response to Trump's crackdown on immigrants, fearing that immigrant employees could lose work permits.
The White House has spent the last few months downplaying the impact tariffs have on the domestic economy, despite anxiety from consumers and businesses over the impact tariffs have on prices.
The deadline for Trump's 90-day pause on some of his highest tariffs is scheduled to expire next week, as the White House tries to broker deals with dozens of countries that could face high tariffs.
The White House announced on Tuesday a deal with Vietnam, whose products were scheduled to face a 46% tariff. The country agreed to a 20% tariff rate, with no tariffs placed on US exports. The deal with Vietnam follows deals Trump has made with the UK and China, but there are dozens of other countries whose exports could face high tariffs without a deal.
Amid economic uncertainty, Trump has tried to pass blame on to the Federal Reserve and its chair, Jerome Powell. On Monday, Trump sent an open letter to Powell demanding that the Fed lower interest rates.
'He's costing us a fortune because he keeps the rate way up,' Trump wrote on social media.
Powell, in turn, has said that the Fed has not lowered interest rates because of economic uncertainty caused by Trump's tariffs.
'In effect, we went on hold when we saw the size of the tariffs,' Powell said. 'Essentially all inflation forecasts for the United States went up materially as a consequence of the tariffs.'
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Reuters
44 minutes ago
- Reuters
US fiscal folly could create big, beautiful debt spiral
LONDON, July 3 (Reuters) - The U.S. tax and spending bill passed on July 3 is expected to add more than $3 trillion to the country's deficit over the next decade. If the current debt trajectory continues unabated, it could set off a slow motion debt spiral that could endanger the Federal Reserve's independence. The sobering long-term debt projections of the Congressional Budget Office, opens new tab may actually understate the likely impact on U.S. debt-to-GDP levels of President Donald Trump's "One Big Beautiful Bill". The CBO based its estimate on the assumption that temporary increases in government spending and tax cuts will sunset at a projected date. But this new budget bill, which extended previous tax cuts and other measures, has shown that this sunset often never arrives. Thus, the long-term projections in the U.S. Treasury's annual financial report, opens new tab may be more realistic since they assume the current rate of government spending will continue indefinitely. In the Treasury forecast, the U.S. debt-to-GDP ratio is projected to increase to over 200% in 2050 compared to the CBO's estimate of around 145%. Scarier still, the Treasury forecasts that the U.S. debt-to-GDP ratio will reach 535% by 2100 if current spending plans continue. Proponents of tax cuts argue that they boost GDP growth and thus will slow the rise in debt-to-GDP, but the CBO estimates that the House Bill will only increase real GDP by an average of 0.5%, opens new tab over 10 years or 0.04% per year relative to the CBO's January 2025 projections. The Tax Foundation estimates that the Senate Bill will boost GDP growth by 1.2%, opens new tab in the 'long run'. That hardly makes a difference compared to an expected debt increase totalling almost 10% of GDP. If today's debt dynamics persist, the risk premiums in the U.S. Treasury market will almost certainly climb over the long run. Economists Martin Ademmer and Jamie Rush, opens new tab have analysed the drivers of 10-year Treasury real yields since 1970. They concluded that investors typically demand more risk compensation as the U.S. deficit increases, especially when there is competition from an ample supply of safe assets globally. Thus, Treasury yields rise. Their analysis concludes that these two factors together lifted the natural 10-year real yield for Treasuries by 1.3 percentage points between 2005 and 2023. If the deficit projections for the next decade are realized, this trend should continue. With all this in mind, it was notable that U.S. Treasury Secretary Scott Bessent said last week, opens new tab that he would not boost long-term Treasury bond sales given today's high interest rates. Since the pandemic, the average duration of U.S. government debt has declined significantly as the Treasury has favoured bills over longer-term instruments in an effort to keep interest expenses under control. One reading of Bessent's comments is that the Treasury is concerned about the country's ability to continue servicing its long-term debts if it borrows at today's elevated yields, a message that could push Treasuries' risk premium even higher, making long-term borrowing even less tenable. This reminds me of a similar episode in which a heavily indebted country faced a sudden spike in its already large deficit. As investors lost trust in the country's ability to pay back its debt, long-term yields rose, which in turn forced the government to issue debt at shorter and shorter maturities. This signalled to the market that the government would struggle to pay the existing debt, and this pushed long-term government bond yields even higher. The country's debt entered a doom loop. The country in question: Greece after the 2009 financial crisis. To be clear, I do not expect the U.S. to experience a similar implosion. There are crucial differences between the U.S. and Greece that should prevent this, not least the ability of the U.S. to devalue the dollar and inflate away some of its debt. Greece, as a euro zone member, had no such flexibility. But the new U.S. budget increases the possibility that the U.S. could face a similar debt drama, only in slow motion. If long-term Treasury yields remain higher for longer, the Treasury is apt to continue shortening the duration of its debt. This, in turn, could create a vicious cycle by making government interest expenses more volatile, further imperiling U.S. fiscal health and making longer-term debt even riskier. There appear to be three main off ramps for the U.S. One: politicians could become fiscally prudent and significantly reduce the deficit to a sustainable level. This seems unlikely given both parties' recent track records. Two: the Treasury could impose capital controls to artificially increase demand for Treasuries. 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The Herald Scotland
2 hours ago
- The Herald Scotland
'Big Beautiful Bill' summary shows the biggest changes for you
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The Herald Scotland
2 hours ago
- The Herald Scotland
Unusual Social Security Administration email touts Big, Beautiful Bill
Issuing an overtly political statement is unusual for the agency that oversees Social Security, which makes monthly payments to 73 million retirees, their survivors, and people with disabilities. "It's completely unprecedented," said Alex Lawson, executive director of Social Security Works, a left-leaning advocacy organization focused on retirement benefits. "It's an enormous breach of trust." Lawson contends that the email praising Trump's "Big, Beautiful Bill" violates the Hatch Act, a law against partisan political activity by federal government employees. The Social Security Administration did not immediately respond to inquiries seeking clarification. The White House referred USA TODAY's request to SSA. A tax cut for some seniors During his campaign, Trump promised to eliminate income taxes on Social Security benefits. Instead, the just-passed bill - which Trump will sign in the late afternoon on July 4 - creates a $6,000 federal income tax deduction for Americans 65 and older. Since Social Security benefits are often a large part of seniors' income, some portion of those benefits will now be untaxed for those who qualify for the deduction. "It reduces the amount of Social Security benefits subject to tax, but it's not just for Social Security," explains Garrett Watson, senior policy analyst at the Tax Foundation, a center-right think tank. "This is a historic step forward for America's seniors," said Social Security Commissioner Frank Bisignano, a former Wall Street executive appointed by Trump. "For nearly 90 years, Social Security has been a cornerstone of economic security for older Americans. By significantly reducing the tax burden on benefits, this legislation reaffirms President Trump's promise to protect Social Security and helps ensure that seniors can better enjoy the retirement they've earned." There are many Social Security recipients and seniors who won't get a tax cut, however. About 5% of retired Social Security beneficiaries are ages 62 to 64. There are also deceased workers' survivors and disabled workers who are younger than 65. Among those 65 and older, many have below the standard deduction of $14,600 per person or $29,200 per couple, so they already aren't paying income taxes anyway. At the other end of the spectrum, the deduction phases out for individuals making more than $75,000 or couples earning more than $250,000. Less benefit for those with lower incomes "Lower-income earners benefit less than middle and upper-middle income households," Watson said. On average, seniors in the bottom 20% income will save just 0.1% on their tax bill, according to the Tax Policy Foundation's analysis, about one-tenth of what those in the middle of the income distribution will save. "It's been marketed as tax relief for seniors, but a lot of seniors are going to be surprised when they find out it doesn't apply to them," Watson said. "I'm getting asked all the time by folks what this actually means for their tax situation." Social Security's long-term funding problem And while some will soon benefit form lower taxes, the lost tax revenue could trigger a future automatic benefit cut for all beneficiaries. That's because Social Security benefits aren't taxed like normal income. Instead of being used as general revenues, they go specifically into the trust funds that provide a backstop for Medicare and Social Security. The Social Security and Medicare Hospital Insurance trust funds were on track to be depleted by 2033, but now that date will be moved up to 2032, because the senior citizen tax deduction will lop an estimated $30 billion per year off the tax revenues those trust funds collect, according to the Committee for a Responsible Federal Budget. That, in turn, will trigger a future automatic benefit cut of 24% to all recipients, the centrist think tank projects. Those problems will only grow worse, Watson noted, if Congress renews, increases or makes permanent the senior tax deduction, when it expires in 2028. "It's a mixed bag for seniors, because some seniors will get some tax relief; the cost of that, though, is borne by the entire Social Security system," Lawson said. Email comes amid customer-service 'crisis' Critics are pouncing on the message arriving at a time when the Social Security Administration has been suffering from problems with customer service. The Trump administration has reduced the agency's staff and instituted new rules on identification for applicants, resulting in average wait times that have ballooned to 90 minutes. In June, the agency stopped making public real-time performance metrics about how long they will have to wait to reach a live person on the phone, and how long applications for new benefits take to be approved, USA TODAY reported on June 26. Multiple times, USA TODAY reporters called Social Security's 1-800 line they did not reach a live person before the line disconnected with no warning. Contributing: Sarah D. Wire
