Outlook Despite four consecutive months of declining small business confidence1, businesses have continued hiring at a healthy pace.2 A solid jobs market implies consumers are generally in good shape. However, consumers are generally cautious currently given a pickup in the personal savings rates and a modest decline in consumer spending. Specifically, consumer spending (as measured by Personal Consumption Expenditures) growth declined a bit to +0.2% month-over-month, with an annual rate of +2.1% - a slight decrease from +2.3% in March 2025. The decline in spending was likely offset by a pickup in personal savings, which sits at its highest level in a year.3 On balance, a healthy but cautious consumer is, in our view, positive for investors. . . . The U.S. equity market closed out the week with solid gains, the S&P 500 reached the 6,000-point level for the first time since February (up 1.5%), the blue-chip Dow Jones rose 1.2%, the tech-heavy Nasdaq advanced 2.2%, while the Russell 2000 climbed 3.2%. Positive trade developments and encouraging labor market data spiked sentiment in the prior week. Presidents of the U.S. and China, the world’s two largest economies, held a phone call on Thursday. The call reported by Trump had a “very positive conclusion,” and China agreed to resume shipments of rare earth minerals to the U.S., which had been previously suspended in April.4 An invitation was also made by Chinese President Xi Jinping to Trump offering him to visit China, the offer was reciprocated. Ultimately, both countries agreed to hold another round of trade talks in London on July 9th. Turning to the labor market, job openings in April came in higher than expected (7.391M v. 7.110M)5, while private hiring in May slowed to the lowest level since March 2023 (37K v. 111K).6 Lastly, the highly followed nonfarm payrolls report on came in on Friday showing stronger than expected employment change in May (139K v. 126K).7 Key Statistics include:
Nonfarm Payrolls: 139K v. 126K est. (147K prev.)
Unemployment Rate: 4.2% v. 4.2% est. (4.2% prev.)
Average Hourly Earnings (MoM): 0.4% v. 0.3% est. (0.2% prev.)
Average Hourly Earnings (YoY): 3.9% v. 3.7% est. (3.9% prev.) The labor market data holds high importance as employment trends remain a key gauge of consumer strength amid ongoing headwinds, such as tariffs. The May jobs report shows continued strength in the labor market even as some signs of cooling appear. The level of jobs added remains above where it needs to be to prevent a rise in the unemployment rate. Economists predict job gains above 100k and below 200k is more or less the goldilocks number that will stimulate further growth and prevent a drop in employment. The U.S. economy added 139K jobs in May, slightly higher than expected, while the unemployment rate remained unchanged at 4.2% (still near historical lows). Notable job growth was largely contributable to a rise in healthcare services (+62,000), followed by leisure and hospitality (+48,000), offset by declines in manufacturing (-8,000) and the federal government (-22,000). Additionally, wage growth continues to outpace the rate of inflation, rising 0.4% for the month and 3.9% from a year ago, both measures came in better than expected. While the report shows resilience in the U.S. economy, the levels of job gains in 2025 is trending below those added in 2024. Job gains in the prior two months saw considerable downward revisions. April’s count was revised lower by 30K, and March’s count was revised lower by 65K to a total of 120K.8 Most hard data show the economy is in decent shape, however, sentiment surveys paint a different picture as consumers and businesses brace for the uncertain incoming impacts of tariffs.9 As for the Federal Reserve, officials remain focused on managing risks. In recent speeches, policymakers have indicated increased concerns for the potential on tariff-induced inflation. However, the stronger than expected jobs report does little to signal alarm bells. For now, consensus and current data support the case that the Fed will hold rates steady at the upcoming meeting in two weeks.10 | 
