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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
The effects of Donald Trump’s cuts to government programmes and his tariff policies are likely to show up in June’s US jobs report, with hiring expected to have slowed.
The data on Thursday will show the US added 120,000 jobs in June, down from 139,000 the month before, according to the forecasts of economists surveyed by Bloomberg. The unemployment rate is expected to have risen to 4.3 per cent, from 4.2 per cent.
June’s data should capture job losses from the Trump administration’s huge cuts to the public labour force since taking office. The figures will also reflect any slowdown in hiring that has happened as companies plan for hits to profits from the president’s widespread tariffs. Consumer spending has slowed in recent months, which may also stymie corporate hiring.
Continuing jobless claims in June rose to the highest level since late 2021, suggesting that it has become harder for people who have lost their jobs to find new ones. That could send the unemployment rate this month higher, said economists at Citi.
“The rise in continuing jobless claims makes us more confident the unemployment rate will begin rising again. We project 4.4 per cent unemployment in next week’s report for June,” they wrote.
Still, the changes in June may not be dramatic enough to persuade the Federal Reserve to begin cutting interest rates before September.
“It’s pretty clear that the Fed is getting ready to ease again. If we were to get one or two soft reports, they would be ready to go,” said Eric Winograd, senior economist for fixed income at AllianceBernstein. But, Winograd is not expecting marked weakness this month. “I expect continuity in this report.” Kate Duguid
Will Eurozone inflation confirm that ECB cuts are nearly done?
Inflation figures due on Tuesday will provide another clue to one of the biggest questions in Europe’s financial markets: whether or not the European Central Bank is nearing the end of its interest rate-cutting cycle.
ECB president Christine Lagarde said earlier this month, as the central bank lowered its borrowing costs by a quarter point to 2 per cent, that it had “nearly concluded” a monetary policy cycle that has reduced the policy rate from a peak of 4 per cent last year.
Swaps markets are pricing in just one more quarter-point cut over the coming year, despite euro area inflation falling below the ECB’s 2 per cent target to reach 1.9 per cent in May.
Economists polled by Reuters are expecting it to tick back up to 2 per cent in June. That forecast is shared by Bank of America analysts who expect it to be a temporary increase “due to the spike in oil [that] should correct in July”. More broadly, analysts expect the euro’s recent strength to put downward pressure on prices this year.
Investors are still waiting to see whether there is a hit to Eurozone growth from US tariffs. If a slowdown emerges, the ECB’s ability to respond with rate cuts depends on the path of inflation. Ian Smith
Are trade tensions still hitting activity in China?
China releases a number of data early next week that will give investors a clearer picture of how Asia’s largest economy has weathered trade tensions with the US.
Official manufacturing and non-manufacturing purchasing managers’ indices for June are due on Monday, and are expected to show a reading of 49.7, according to a Reuters poll of economists. Any reading below 50 indicates a contraction.
On Tuesday Caixin will release its manufacturing PMI, which a Reuters poll is forecasting to be 49 after a reading of 48.3 in May. The Caixin survey focuses on smaller and more privately owned businesses, which are often more export-oriented. Markets are prepared for a contraction but will react negatively if it is worse than expected.
The downbeat consensus comes after the country’s manufacturing PMI unexpectedly fell in May. More recent figures have not provided much space for optimism — figures released on Friday showed industrial profits slumped 9.1 per cent in May.
Property prices are sliding and deflationary pressures have mounted, while exports to the US plunged 34 per cent in May.
The weaker data suggests the boost to exports and activity provided by businesses “frontloading” to get ahead of US tariffs is now fading.
Nomura’s index of Asia ex-Japan’s aggregate exports, which the bank says has correctly predicted past significant turning points, is indicating a sharper decline in Asian export growth “driven by weak import demand from China and a moderation in manufacturing PMIs for China and broader EM”.
“While Asia’s export growth has outperformed in March and April due to tariff-driven frontloading, we have seen some signs of payback in May for a number of countries,” the bank said in a recent note. William Sandlund
