Big and Beautiful might be an overstatement of the jobs report, but once again, it looked solid, certainly relative to ADP. We were looking for something more in line with ADP, but this report was better, and while there are some “quibbles,” the report was more consistent than the previous month’s.

The Establishment Survey once again beat expectations. Only one economist who submitted an estimate to the Bloomberg survey was above 147 (I find it incredibly hard to believe that so many people with so many resources could get it that wrong, but apparently that is the case). It is positive (though surprising to many) that the 2 month revisions were positive 16k, after last month’s rather large 95k downward revision.

Private payrolls did miss, as government hiring picked up the slack there (74k was the number, so still solid, but we did like it when the private sector was almost completely driving the job market).

The unemployment rate ticked down again, to 4.1%. It hasn’t been below 4% since April 2024, so that is an impressive number! Unfortunately (from our perspective), it was largely accomplished by another reduction in the labor force (the participation rate dropped to 62.3, and you have to go back to 2022 to find such a low labor participation rate). The Household Survey, which is used for the unemployment rate calculation, did better than last time – it added 70k jobs versus a loss of 590k, and had a big reversal (in the right direction) between full-time jobs (+437k) versus part-time jobs (-367k).

The birth/death model only contributed 24k jobs in total, which seems very plausible (versus the prior two months when it was large relative to the total number).

A much better overall report than last month, as it was far more consistent this time around!

We highlighted some “quibbles,” but this almost certainly takes July off the table for the first cut.

With this behind us, the excitement mounts for the passage of the Big Beautiful Bill. This is important and very positive:

• Being done by the House and Senate rather than executive order gives us a solid roadmap for years to come.
• A win is a win, and should help the President in his other negotiations (a win following the win with delivering a ceasefire in Iran using Peace Through Strength).
• I’m not particularly worried about the deficit at the moment. Assuming the projections turn out correct, it takes time for them to play out. But, with many of the cuts frontloaded, we could see growth to offset that portion, and as we’ve been tracking, tariff revenues have grown to a very significant monthly line item, offsetting many negatives.

With that as a backdrop, I have to go back to neutral on rates.

I would look to buy on significant weakness from here (above 4.45 or so on tens), but the jobs report (unlike ADP which was definitively weak), takes the Fed off the table for now, and the rest will be a balancing act.

As we make it through the Bill, we see signs that the National Production for National Security agenda will take center stage – deregulation, building out “mission critical” industries, etc., can provide further impetus for domestic growth, on top of the stimulus in the bill.

Tariffs remain a concern, but unless we get something much worse than a further extension of the “pause” rates, the positives are outweighing the negatives here for the economy and markets.

Sorry for the delayed report, some Wi-Fi issues on the flight back from London!

Have a great 4^th of July long weekend!

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