Jobs report shifts Fed interest rate forecasts

May Labor Department figures were slightly higher than expected but down from April.

Jun 6, 2025 - 20:46

Jobs report shifts Fed interest rate forecasts

Will they or won’t they?

With the relatively bland U.S. labor numbers for May bumping against randy trade deals and thirsty tariff tiffs, there’s leverage for Federal Reserve Board Chair Jerome Powell to re-examine the expected three 25-basis point rate cuts later this year.

The Department of Labor reported June 6 that hiring remained stable in May with employers adding 139,000 jobs, gains that were slightly higher than expected but down from April. The unemployment rate stayed the same at 4.2%, as expected by most economists.

Leisure and hospitality plus healthcare sectors reported the highest numbers of jobs with the DOGE-ed federal workforce among the lowest.

But the manufacturing and retail sectors also shed jobs, which coupled with the federal losses, display an irrefutable shock from the Trump administration’s trade wars churning the global economy.

Jerome Powell, chairman of the US Federal Reserve, may not cut interest rates in July after a stronger than expected jobs report.
Bloomberg/Getty Images

Trump’s Interest Rate Battle Calls

President Trump, just days before the jobs report, blasted the central bank chairman as “unbelievable” and a “disaster” on Truth Social for Powell’s delay in lowering interest rates, a move Trump maintains is choking economic growth.

Trump’s latest angry tirade against Powell was sparked after the payroll firm ADP reported private-sector firms added just 37,000 jobs in May, the lowest total in more than two years. An irked Trump demanded 'Too Late’ "Powell must now LOWER THE RATE.”

Minutes from a meeting of the Federal Reserve Bank leaders, which was held in early May and released on May 29 show the central bank voted to undertake open market operations “as necessary” to maintain the federal funds rate in a target range of 4.2% to 4.50%.

In a related action, the Board of Governors of the Federal Reserve System voted unanimously in early May to approve the establishment of the primary credit rate at the existing level of 4.5 percent – which means interest rates for lenders, consumers and the rest of Americans won’t be budging in the near term.

This added fuel to Trump’s increasing vitriolic displays against Powell (a mere harbinger of what the president started throwing down against former First Buddy and Tesla (TSLA) CEO Elon Musk on June 5.)

Interest rate cut bets reset after jobs report

Market participants remain downbeat about interest rate cut chances despite President Trump's demands.

The CME's highly-watched FedWatch tool showed a decline in odds of an interest rate cut this summer.

The chances the Fed Funds Rate will be in a 4% to 4.25% range in July fell to 16.5% on Friday, June 6, from 30.4% on Thursday, June 5. The odds were nearly 57% one month ago.

The Street’s Chris Versace reports the market will need to reconsider the three 25-basis point rate cuts it expects per the CME Fed Watch Tool.

“With Atlanta Fed President Raphael Bostic signaling ahead of this data that he sees room for just one rate cut, the growing likelihood is more Fed heads will fall into that camp based on the aggregate data published this week.” Versace says. “ We also have to wonder if Bostic’s comment helps lay the groundwork for the Fed’s upcoming set of economic projections that it will publish alongside its next policy decision on June 18.’’

Thus, the odds of the Fed indicating just one rate cut in the second half of 2025 will increase if next week’s May CPI and PPI data support the “May inflation data we’ve seen thus far and there is no meaningful progress on trade deals,’’ Versace says.