June Non-Farm: Does not support The Federal Reserve (FED) to cut interest rates early (maintains dot plot path)

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In June, the U.S. non-farm payroll data greatly exceeded market expectations, with job growth, a decline in the unemployment rate, and no wage increases (inflation), demonstrating the strong resilience of the labor market.

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Key points:

▪️Differentiation of Employment Structure

In June, the increase in employment mainly came from government departments (+73,000) and low-skilled, labor-intensive industries such as healthcare and leisure accommodation, while the technology-skilled service sector saw a net loss of over 70,000 jobs.

If the government's support is excluded, the overall momentum is actually weakening.

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▪️Strong non-farm data rules out the possibility of a rate cut in July.

The addition of jobs far exceeded expectations, and the unemployment rate is declining, coupled with a slowdown in wage growth, which gives The Federal Reserve (FED) no urgent reason to start a rate cut cycle in July.

The current US economy still has the ability to withstand pressure, and The Federal Reserve (FED) will continue to focus on "preventing inflation rebound" as its core policy, adopting a "wait-and-see" approach.

With the addition of the Great Beauty Act, if passed, there will be demand for about 1 trillion in bond issuance around July to September (fiscal subsidies), and inflationary pressures caused by inventory replenishment (tariff trade wars) may push up real interest rates and disrupt prices.

Therefore, before the inflation disturbances have settled and the fiscal supply shocks have been digested, as well as considering the minutes from the June FOMC meeting and Powell's speech this week, the Federal Reserve (FED) still demonstrates clear patience and strategic restraint, and whether to initiate interest rate cuts in September will depend on the inflation trend.