Economic Update 7/2/26

Top 5 Takeaways This Week

• June job growth came in well below expectations, with 57,000 new jobs added.

• The unemployment rate declined to 4.2%, though largely because fewer people participated in the labor force.

• Manufacturing employment improved modestly, continuing a positive trend for domestic production.

• Wage growth remained steady, and private-sector hiring outpaced government hiring.

• The upcoming second-quarter GDP report will provide important insight into the economy's overall direction.

We had Non-Farm Payrolls released this morning. The release is a day earlier than normal due to tomorrow being a federal holiday. In June, the U.S. economy added 57,000 jobs. This was a drop from the already downwardly revised May total of 129,000. This represents the lowest job growth in four months and is well below the forecasted level of 110,000.  One of the major positives within the jobs number last month was the growth in the professional and business services sectors. Healthcare also contributed in a positive manner. We also saw some improvement in manufacturing. Manufacturing payrolls in June were up 3,000 and compared favorably to the decline of 2,000 for May. This is always a positive indication of overall economic strength on a domestic basis.

In a somewhat surprising release, the Unemployment Rate in the U.S. declined by 0.1% to 4.2% when compared to May. The June level also represented the lowest unemployment rate since June of last year. However, the reason behind the lower unemployment rate was a contraction in the labor force. The Labor Force Participation Rate fell to 61.5%, the lowest level since March of 2021. Both of these related numbers are concerning, and we will be watching next month to see if there is an improvement or continued weakness.

On a more positive note, average weekly hours for workers remained steady at 34.3. This is the third straight month at this level. Also, average hourly earnings were up 3.5% on a year-over-year basis. This was a modest improvement from the 3.4% increase during May. The release also showed that June private payrolls grew by 49,000. This compares favorably to government job growth of only 8,000.

The above is somewhat concerning given weaker-than-expected employment gains and a decline in the labor force. It certainly could be a sign of slower economic growth. This makes the upcoming second-quarter GDP report, which will be released later this month, that much more important. However, the related employment numbers could definitely give the Fed a reason not to raise interest rates during their next meeting, which takes place in the last week of the month.

We continue to view equity investments in a positive way and are broadening our industry participation beyond technology and energy. We also expect interest rates to continue to decline and will add to our fixed-income holdings as appropriate.

We are now only two days from the July 4th holiday and the 250th birthday of our great country. We are truly blessed and fortunate to live in the U.S. and benefit from all the opportunities available to us. I hope each of you has a terrific holiday and takes the time to look around, with friends and family, at what we have been given to enjoy.

Happy 4^th.