Archive

Payrolls Challenge Resilient Narrative

• Revisions drove payrolls into a stagnation that runs contrary to our narrative of rolling resilience, but some contributors are spurious and don’t break the broader strength.
• Seasonal adjustment caused 76k of the 258k revision. State and local education workers represented 108k, and are lower since April, despite the DOE closure shifting jobs here.
• Payrolls still grow by 1% y-o-y, like household employment, with JOLTs data fine and the unemployment rate stable. The Fed should resist cutting without follow-through.

By Philip Rush

HEM: One-Touch Easing

• Payrolls revisions challenge the rolling resilience seen in most other hard data releases, but seem over-weighted.
• Underlying price and wage inflation mostly track >2%, especially in the UK, which doesn’t need more rate cuts.
• Policymakers biased to ease will deliver it on a batch of bad outcomes, even if the evidence proves fleeting.

Activity’s Tariff Hangover In Q2

• GDP growth broadly beat expectations again in Q2 on both sides of the tariff disruption. Euro area growth slowed by less, while the US rebounded vigorously.
• Temporal distortions to demand didn’t open up slack as European supply growth stays stagnant. Surveys suggest it won’t appear in Q3 either as demand growth rebounds.
• Underlying US GDP growth may have slowed, but the extent is modest and questionable. Rolling resilience should keep delaying rate cuts, preventing them from occurring.

By Philip Rush

US: Policy Rate Held At 4.5% (Consensus 4.5%) in Jul-25

• The Federal Reserve maintained rates at 4.25%-4.5% in a 9-2 decision, with Governors Bowman and Waller dissenting in favour of a 25bp cut—marking the first double dissent by Board members since 1993 amid deepening divisions over the appropriate timing for policy easing.
• The Committee downgraded its growth assessment while acknowledging that inflation remains "somewhat elevated". Chair Powell emphasised no decisions have been made regarding September rate cuts, maintaining a cautious, data-dependent approach.
• Future interest rate decisions will hinge on the persistence of tariff-induced inflation, labour market resilience, and the anchoring of inflation expectations, with dissenting governors arguing that transitory tariff effects should not preclude supporting employment through rate cuts