Weekly Economic Update: June 10, 2025

Give us your best offer

President Trump gave our trade adversaries a Wednesday deadline to step up with their best offer or ideas as to how they will trade with us, the same day a 50% tariff went into effect on aluminum and steel.^1,2 Markets seemed to take things in stride; much of the angst initially felt when “liberation day” tariffs were first announced (which initiated a vigorous selloff and a spike in volatility) has been dulled somewhat.

Not that things can’t perk up again, but it’s beginning to feel like the deals will be slow in coming and the shock of the massive tariffs are largely behind us for now. Markets had a good week as the pressure came off Treasury yields, and jobs growth showed signs of weakness but not enough to worry about. Volatility may pick up again as we get closer to the end of the 90-day pause in tariffs, but for now rumors and innuendo that “things are getting done behind closed doors” and that “we peasants do not need to bother ourselves with the details” is good enough for the markets.

Trump spoke with Chinese President Xi Jinping for over an hour with more talks scheduled, and he also met with new German Chancellor Friedrich Merz.^3,4 (Germany holds big sway in the EU so trade was very likely brought up.) Plus, the “Big, Beautiful Bill” (BBB) is still in play, although it’s getting more interesting, if that’s at all possible.

There have been murmurings that trade talks with China are going to be difficult, and the votes aren’t there in the Senate for the reconciliation bill to pass.⁵ But it seems like everything these days happens so quickly and two weeks is an eternity, whether we’re talking about the BBB or trade talks.

Just as we were thinking the week was pretty quiet and almost normal after the first two months of the quarter, a very public spat erupted between Trump and Elon Musk, the newly departed Department of Government Efficiency (DOGE) chief.⁶ Musk instigated the dust-up, giving the reason that he felt the BBB was not cutting the federal deficit enough. A media circus ensued, and Tesla shares were crushed on Thursday.⁷ Markets recovered strongly to end the week on a decent May jobs report (more below).

Job growth cools, but not enough for the Fed to act yet

The Job Openings and Labor Turnover Summary (JOLTS) number for April showed a surprising increase in openings, a good thing because it means there are jobs available.⁸ The data is usually pretty stale since it comes out over a full month after the most recent month.

The April JOLTS number was 7.4 million, up from March’s 7.2 million reading and beating the forecast, which was signaling a drop to 7.1 million. This little surprise was welcomed, as it means hiring picked up and perhaps the announced tariffs did not have as deleterious an impact as anticipated.

The next stop on the jobs week train was last Wednesday’s ADP number. The consensus was calling for +110,000, while the actual number was +37,000.⁹ That number meant that hiring in the private sector in May was the lowest in more than two years. The report immediately drew a response from Trump on Truth Social: “ADP NUMBER OUT!!! ‘Too Late’ Powell must now LOWER THE RATE.”¹⁰

Markets viewed that as a signal that the economy was slowing. The 10-year Treasury, which was pushing a yield of nearly 4.6% a couple of weeks ago, tumbled to 4.35%, and the likelihood of Fed cuts once again took center stage.¹¹ Traders saw a very slim chance that rates remain where they are currently, and over 70% saw Fed Funds rates at least between 3.50%-4.00% by December, down from the current 4.25-4.50% level.¹²

That all changed with the Bureau of Labor Statistics (BLS) employment report on Friday.¹³ We created 139,000 non-farm jobs in May, topping the consensus estimate of +129,000. The prior two months were revised downward by a combined 95,000 jobs, and the unemployment rate remained at 4.2%.

The report was solid enough that it will allow the Federal Reserve to continue to wait before moving on rates. After the May jobs report, the odds of at least three 25-basis-point cuts by December declined to 59%. Jobs continue to grow, and losses (as a result of tariffs or government cuts) have yet to materialize. The biggest area of job creation was health care, which is heavily influenced by government spending, so the job market may not be as solid as it appears.

Coming this week

• Last week was all about jobs. This week will be all about inflation, with the latest Consumer Price Index (CPI) and Producer Price Index (PPI) numbers released.
• The action starts on Wednesday with CPI and Core CPI (2.3% and 2.8% in April, respectively.¹⁴ Personal Consumption Expenditures (PCE) and Core PCE were both down last month, so if we see CPI hit 2%, look for a huge outcry from many directions for the Fed to start cutting rates.
• We’ll also see MBA mortgage applications on Wednesday. Then PPI and Core PPI plus weekly unemployment claims on Thursday.
• We’ll finish the week with consumer sentiment on Friday. Confidence jumped unexpectedly a few weeks back, so this reading should either confirm that consumers are OK and hanging in there or show the confidence number was fluky.

Sources:

¹ Jarrett Renshaw and Andrea Shalal. USA Today. June 2, 2025. “Exclusive: Trump pushes countries for best offers as tariff deadline looms.” https://www.usatoday.com/story/news/politics/2025/06/02/trump-sets-deadline-for-tariff-offers/83995232007/. Accessed June 9, 2025.

² Wyatte Grantham-Philips. AP. June 4, 2025. “Trump’s promised steel and aluminum tariffs go into effect.” https://apnews.com/article/trump-tariffs-steel-aluminum-trade-240dbc3823ecd66d3dd05a66883f9277. Accessed June 9, 2025.

³ Laura Bicker and Ruth Comerford. BBC. June 5, 2025. “Trump confirms China trip after ‘very good’ call with Xi.” https://www.bbc.com/news/articles/c0qg23gqllwo. Accessed June 9, 2025.

⁴ AP. June 6, 2025. “Germany’s Merz says he found Trump open to dialogue and committed to NATO.” https://apnews.com/article/germany-merz-trump-nato-oval-office-meeting-05776176d6359ae3139086107b56ab2b. Accessed June 9, 2025.

⁵ Alexander Bolton. The Hill. June 9, 2025. “Republicans look for reset on Trump’s ‘big, beautiful bill.’” https://thehill.com/homenews/senate/5337997-republicans-thune-trump-bill/. Accessed June 9, 2025.

⁶ Clare Duffy and Amy O’Kruk. CNN. June 6, 2025. “How the feud between Elon Musk and Donald Trump exploded over 72 hours.” https://www.cnn.com/business/timeline-elon-musk-trump-x-dg. Accessed June 9, 2025.

⁷ Yahoo! Finance. “Tesla, Inc. (TSLA).” https://finance.yahoo.com/quote/TSLA/. Accessed June 9, 2025.

⁸ U.S. Bureau of Labor Statistics. June 3, 2025. “Job Openings and Labor Turnover Summary.” https://www.bls.gov/news.release/jolts.nr0.htm. Accessed June 9, 2025.

⁹ ADP. June 4, 2025. “ADP National Employment Report: Private Sector Employment Increased by 37,000 Jobs in May; Annual Pay was Up 4.5%.” https://mediacenter.adp.com/2025-06-04-ADP-National-Employment-Report-Private-Sector-Employment-Increased-by-37,000-Jobs-in-May-Annual-Pay-was-Up-4-5. Accessed June 9, 2025.

¹⁰ James Downie. MSNBC. June 5, 2025. “Trump fumes at Jerome Powell after weak ADP jobs report.” https://www.msnbc.com/opinion/msnbc-opinion/trump-jerome-powell-fed-adp-jobs-report-interest-rates-rcna210961. Accessed June 9, 2025.

¹¹ CNBC. “U.S. 10 Year Treasury.” https://www.cnbc.com/quotes/US.10. Accessed June 9, 2025.

¹² CME Group. “FedWatch.” https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html. Accessed June 9, 2025.

¹³ U.S. Bureau of Labor Statistics. June 6, 2025. “Employment Situation Summary.” https://www.bls.gov/news.release/empsit.nr0.htm. Accessed June 9, 2025.

¹⁴ U.S. Bureau of Labor Statistics. May 13, 2025. “Consumer Price Index Summary.” https://www.bls.gov/news.release/cpi.nr0.htm. Accessed June 9, 2025.

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