US jobs growth dashes hopes of July rate cut as Fed takes ‘wait and see’ approach on Trump tariffs impact

By JOHN-PAUL FORD ROJAS

Updated: 22:00 BST, 3 July 2025

Hopes of a US interest rate cut later this month appeared to have been dashed yesterday after better-than-expected official jobs figures.

Closely-watched non-farm payrolls data showed the world’s biggest economy added 147,000 jobs in June, beating economists’ forecast of 110,000.

In contrast, the UK labour market darkened, adding to predictions of a Bank of England rate cut this summer.

Experts said the US figures closed the door on the possibility of the US Federal Reserve cutting rates this month. 

The central bank has come under intense pressure to make cuts from President Donald Trump, who even resorted to personally insulting Fed chief Jerome Powell as a ‘stupid person’ and ‘numbskull’.

It has so far resisted, taking a ‘wait and see’ approach to the impact of Trump’s tariffs on inflation and growth.

Jibes: President Donald Trump has even resorted to personally insulting Fed chief Jerome Powell (pictured) as a ‘stupid person’ and ‘numbskull’

Recently, key officials had seemed open to a change of heart, to head off a downturn in the labour market. 

But yesterday’s figures appear to quash that possibility, which was raised by the Fed’s governing board members Christopher Waller and Michelle Bowman.

Seema Shah, chief global strategist at Principal Asset Management, said: ‘Today’s data of higher-than-expected payrolls, a drop in unemployment rate and a fall in jobless claims completely dispels the case for imminent rate cuts.’

In Britain, central bankers’ worries about jobs are backed up by data and markets see an 80 per cent chance of a Bank of England rate cut, from 4.25 per cent, next month.

Yesterday, a monthly purchasing managers’ index business survey showed employment in the UK’s dominant services sector fell for the ninth month in a row. 

And while overall private sector growth picked up pace in June, growth for the second quarter will be much slower than the robust 0.7 per cent pace seen at the start of the year.

Thomas Pugh, chief economist at accountancy firm RSM, pointed to likely growth of just 0.2 per cent in the April-June period. 

That, together with evidence of reduced price pressure, ‘makes a rate cut in August even more likely’, he said.

Rob Wood, chief UK economist at Pantheon Macroeconomics, said: ‘Happy days as growth improves and inflation slows; the MPC [the Bank of England’s monetary policy committee] could welcome the news with another cut in August.’

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US jobs growth dashes hopes of July rate cut as Fed takes ‘wait and see’ approach on Trump tariffs impact

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