Mixed signals from labor market

The June labor market data painted a somewhat conflicting picture. The ADP report released midweek showed a surprise decline of 33,000 private-sector jobs, the first contraction in over three years, raising concerns about softening business hiring. Yet, the official BLS report showed nonfarm payrolls rising by 147,000, modestly beating expectations, while the unemployment rate ticked down to 4.1%. Job gains were concentrated in healthcare and government, while professional and business services saw a sharp decline of 56,000 jobs, pointing to weakness in previously strong white-collar sectors. The mixed signals suggest a labor market that is gradually cooling, but not cracking, allowing the Fed to remain patient while watching for broader signs of private-sector softness.

• While we continue to see anecdotal layoff announcements, the overall labor market continues to show resilience
• However, looking under the surface, it looks like a disproportionate amount of hiring over the last six months has come from the healthcare sector and state and local governments
• Importantly, wage growth continues to be strong, with June showing a 3.9% year-over-year gain
• Wage growth is still running at a significantly higher rate than the pre-COVID period and signals a tight labor market
• This report will strengthen the Fed’s wait-and-see approach as it relates to further rate cuts

Big beautiful bill advances in Congress

The “One Big Beautiful Bill” advanced through Congress this week, with the Senate narrowly passing it 51–50 and the House expected to follow suit before the July 4 deadline. The sweeping package extends key provisions of the 2017 tax cuts, temporarily raises the SALT deduction cap, expands the child tax credit, and introduces new “Trump Accounts” aimed at boosting family savings. It also rolls back clean energy incentives and imposes new restrictions on federal Medicaid and food assistance programs. While supporters argue the bill will stimulate growth and middle-class savings, the Congressional Budget Office estimates it will add over $3.3 trillion to the deficit over the next decade. Controversial measures, including preempting state-level AI regulation and taxing international remittances, have drawn pushback, even from some Republicans.

• The overall take-away from this bill is that it will be fiscally stimulative
• While this is positive for the economy, it continues to deteriorate our fiscal situation
• Given our $37 trillion of debt, adding to the deficit puts us in a weaker position
• If we are not able to cut spending, growing our way out of it is the only other solution
• So it is not surprising that in recent weeks and months, the administration has shifted the narrative away from cost-cutting to growth
• It will take a long time to determine whether or not this is achievable; however, in the meantime, this will put pressure on the US dollar and may influence interest rates higher

Vietnam trade deal announced

The U.S. and Vietnam signed a multi-billion-dollar trade agreement this week focused on semiconductors, critical minerals, and technology supply chains. As part of the deal, U.S. companies committed to investing over $8 billion in Vietnam, with firms like Intel and Amkor expanding chip packaging and testing operations. The agreement aims to strengthen economic ties and reduce U.S. reliance on China by deepening cooperation with Vietnam on rare earths and high-tech manufacturing. It also includes provisions for workforce development and regulatory alignment to support long-term industrial collaboration. The deal comes just days before a July 9 deadline for potential U.S. tariff reinstatements, signaling a broader diplomatic effort to stabilize global trade relations. For investors, it highlights Vietnam’s rising strategic value in reshaping supply chains and attracting foreign capital.

• The trade deal was announced ahead of the July 9th deadline that would reinstate the 20% tariff that was announced on Liberation Day
• The announcement avoids a blanket 20% tariff while setting specific tariffs on an industry basis
• While Vietnam isn’t one of our top trading partners, the announcement signals that progress is being made
• It also gives us and our trading partners insight into the framework this administration is using to negotiate
• Given the tight deadline, it will be more important to see if the administration sticks with the reinstatement of blanket tariffs on our other trading partners on July 9th

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