Economists are watching for the impact of government policies like tariffs and the removal of Temporary Protected Status for migrant workers.
Economists forecast the June jobs report to show slowing job growth and a slight rise in the unemployment rate as uncertainty over the effects of tariffs and immigration policy hangs over the US economy.
Nonfarm payrolls (a primary measure of the labor market) are estimated to have risen by 115,000 in June, down from 139,000 in May, according to consensus estimates by FactSet. The unemployment rate is predicted to have risen to 4.3% from 4.2% in May.
“We see things slowing, but we don’t see cause for alarm,” says David Rogal, managing director of global fixed income at BlackRock and lead portfolio manager on multiple funds, including the $18.7 billion BlackRock Total Return Fund MAHQX. “Our expectation is that you’re going to see a moderate slowdown in the labor market, in the low hundred thousand range.”
An early indicator that the job market weakened in June is the rising number of continuous jobless claims, which are reported weekly. “High frequency indicators suggest labor market weakening over the last six to eight weeks,” write UBS economists, who expect June job growth to come in at 100,000.
While the slowdown in the labor market has been relatively modest so far this year, economists are keeping watch on multiple areas where government policy could throw sand in the gears.
The first is President Donald Trump’s order to remove Temporary Protected Status from hundreds of thousands of people. UBS puts the number of people whose status has been revoked so far at 380,000, with the status expiring for 558,000 more in the next few months.
“We expect the TPS-related layoffs to weigh on employment, but by how much, and whether the survey captures it, is highly uncertain,” write UBS economists, who expect that this move will have already cut about 5,000 jobs from the June report.
Economists at Goldman Sachs, who forecast a below-consensus 85,000 jobs added in June, predict that this policy cut nonfarm payrolls by 25,000 in June.
The other unknown is the July 9 expiration of the 90-day pause on tariffs President Trump enacted earlier this year. “Despite a significant juncture for economic policy approaching in the next two weeks, information on what happens appears to us to be elusive,” writes UBS.
Even without the worst-case scenario of tariffs snapping back to pre-pause levels, the uncertainty over such a major part of the economy is damaging in itself. According to the June Manufacturing Survey by the Kansas City Federal Reserve, approximately a quarter of businesses surveyed said they had reduced job postings, while 21% had cut their workforce.
The Federal Reserve is expected to hold off on interest rate cuts in July, with futures markets betting on a nearly 80% chance of this, according to CME FedWatch.
“The main counterpoint to cuts is that inflation expectations have gone up, and [the Fed is] concerned about the inflation shock from tariffs,” says Rogal. “What we’ve seen is that there’s not been much pass-through [of tariffs to consumers] yet. The question of how much pass-through we get is the main thing holding the Fed back.”
