Perspective: Morning Commentary for July 3

Perspective: Morning Commentary

Arlan Suderman

Chief Commodities Economist

July 3 – Stock futures turned modestly higher overnight, ahead of this morning’s big monthly jobs report, while the House of Representatives also prepared to vote on the president’s tax bill. The markets will be closed for the holiday, but traders know that they will return on Monday for a pivotal week regarding tariff policy. The VIX is trading near 16 this morning, while the dollar index is trading near 97.2. Yields on 10-year Treasuries are trading near 4.33%, while yields on 2-year Treasuries are trading near 3.87%. Crude oil prices are quietly lower, while the grain and oilseed markets were mostly firmer overnight.

The economy created 147K jobs in June, beating analyst expectations that 110K jobs were created. The May numbers were revised up to 144K jobs created, up from the 139K originally reported, while the April number was increased by 11K. However, private payrolls rose by just 74K in June, down from a downwardly revised 137K the previous month. Job gains were primarily in state government jobs and in healthcare, while the Federal government continued to cut jobs. The job participation rate dropped once again in June, falling to 62.3%, which is its lowest level since December 2022. As a result, the unemployment rate fell to 4.1% in June, down from 4.2% in May, and down from analyst expectations that it would rise to 4.3%. This morning’s report revealed that 7.0 million people remain unemployed currently, which changed little in the month of June. The unemployment rate has remained low primarily between 4.0 and 4.2% since May of last year. The number of long-term unemployed (those jobless for 27 weeks or more) rose by 190K to 1.6 million, which largely offset a decrease seen in May. The survey revealed that there were 637K “discouraged” workers in June, up 256K from the previous month. These are marginally attached workers who believe that there are no jobs available to them. The survey also revealed that there were 1.8 million people who said that they want to work, and that they had looked for a job at some point in the past year, but that they had not looked over the past four weeks.

State government jobs increased by 47K in June, with 40K of those in education. Local government added 23K jobs, while Federal government dropped 7K. Federal government jobs overall are down by 69K since peaking in January. Those who are accepting severance packages currently are still considered as employed in this report, so we could see a big change come September and October when those packages expire. Healthcare added another 39K workers in June, while social assistance added 19K. Average hourly earnings rose by 0.2% on the month in June, down from 0.4% in May, while rising 3.7% on the year, down from 3.9% in May. The average hourly workweek slipped to 34.2 hours, down from 34.3 hours previously.

First time claims for unemployment benefits fell to 233K in the week ending June 28, down from 237K the previous week, and below analyst expectations of 240K. That dropped the four-week moving average to 241.5K claims, down from 245.25K the previous week. Continuing claims for the week ending June 21 were unchanged at 1.964 million, while the four-week moving average for continuing claims rose by 15.5K to 1.954 million. That’s the highest moving average since November 20, 2021 when it was 2.004 million. Initial claims for unemployment benefits by former Federal civilian workers totaled 453 in the week ending June 21, down 27 from the previous week. Continuing claims filed by former Federal civilian workers in the week ending June 14 totaled 7,103, up 366 from the prior week.

We have a trade deal with Vietnam. I discussed this in yesterday’s Midday Commentary, but I wanted to repeat the significance of this deal with China’s neighbor. China has been using Vietnam as a pass-through to move products to the United States. This trade deal worked out between President Trump and Vietnam’s General Secretary To Lam drops U.S. tariffs from 46% to 20% for products made in Vietnam, but keeps them at 40% for transshipped goods. Vietnam’s tariffs on U.S. goods reportedly drop from 90% to zero, opening the door for the opportunity to import large quantities of U.S. goods, including commodities. That includes ethanol, with Vietnam moving to a 10% blend starting next year, in addition to dried distillers grains and solubles, corn, wheat, pork, beef, and more. Vietnam had been getting many of these goods from China. This agreement provides a framework for other trade deals that Trump hopes to announce after tomorrow’s Independence Day holiday.

Grain and oilseed prices rallied on the above news on Wednesday, but they gained momentum on rumors that China was considering a renewed commitment to the Phase 1 trade deal signed during Trump 1.0. That’s a possibility, although I will remain a skeptic until I see the commitments start to roll in at a hefty pace. China’s economy continues to feel the pain of the trade war, as it needs access to the U.S. consumer market, as well as the foreign investment needed to prop up its economy. Recommitting to the old deal may allow it to do so.

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Perspective: Morning Commentary for July 3

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