Core Insights - The latest employment report indicates a slowdown in private sector job growth, attributed to tighter immigration policies leading to a decrease in labor supply [1][4] - The Federal Reserve is expected to maintain a wait-and-see approach, awaiting data on tariffs' impact on inflation and consumption [1][8] Employment Data Summary - In June, non-farm payrolls increased by 147,000, exceeding expectations, but private sector jobs only rose by 74,000, below the three-month average of 128,000 [1][4] - The unemployment rate fell from 4.24% to 4.12%, not due to increased job opportunities but rather a decline in labor force participation, also linked to stricter immigration policies [3][4] Labor Market Dynamics - The labor market is exhibiting a paradox where private sector job growth is slowing, yet the market is becoming tighter [4] - Job growth in June was primarily in state government and healthcare, with private sector employment led by a slowdown in the service industry [4] Immigration Policy Impact - Immigration restrictions have two main effects on the labor market: 1. It lowers the employment balance point needed to maintain stable unemployment from 210,000 jobs per month last year to 140,000 this year, with expectations of a further drop to 70,000 by year-end [5] 2. It suppresses labor force participation rates, as enforcement actions create a chilling effect, reducing the willingness of workers to participate [7] Federal Reserve Outlook - Average hourly earnings increased by 0.2% month-over-month in June, with a year-over-year growth rate declining from 3.8% to 3.7% [8] - Despite a gradual slowdown in labor input, there is no significant market loosening, and the unemployment rate remains low, leading the Federal Reserve to likely refrain from interest rate cuts in July [8]