Tariffs – Jobs – Corporate Earnings
Last week’s job and tariff reports overshadowed favorable corporate earnings reports from META, Microsoft, and Apple, pushing major stock indexes lower for the week.
The Dow finished off (2.82%), the S&P 500 (2.37%), the Nasdaq (1.97%) and the Russell 2000 (4.14%). Foreign stocks were lower by (4.08%) and emerging markets (2.81%).
The yield on the US 10-Year ended the week lower @ 4.216%.
317 S&P 500 companies have reported 2nd quarter earnings with 83% beating profit expectations according to Barrons. Sales results were higher by 2.6% and profits 8.3%. Rising profit margins could prove positive as the tariffs fully enter our system.
Job Revisions
The jobs reports for July suggested the US created 73,000 jobs, well beneath expectations. According to CNBC online, the prior month, June’s job creation number was initially reported at 147,000, and is now revised down to 14,000. Revisions to both May and June are now reported lower by a combined 258,000. The unemployment rate ticked higher to 4.2% from 4.1%.
Should a weakening job market be a surprise? In my opinion, many companies have only hired as necessary. Combining this with normal attrition, I am not surprised. The hope: job market weakening will be temporary as companies and consumers work through the maze of tariffs, their potential, and actual impact.
How dependable is the monthly jobs report? Last Friday President Trump decided to take matters into his own hands terminating the Commissioner of the Bureau of Labor Statistics, Erika McEntarfer.
Job data revisions have been significant for years. With significant advancements in technology, it is hard to understand how often and dramatic the jobs data is revised, in either direction.
Trump and the Fed
Our economy is now at a time of increased interest rate sensitivity. The monthly jobs report is a significant input into the interest rate decision-making process of the Federal Reserve. Having timely and accurate information could assist decision making to be more forward looking. Would Chairman Powell have lowered rates last week if he had known May and June’s employment reports was revised downward?
President Trump appears to be zeroing in on the remaking of the Federal Reserve. Although the Fed has been far from perfect, there have been a handful of occurrences in my career where Fed policies helped guide us through challenging times. Presidents never want the Fed to raise rates during their term as higher rates typically slow their economic scorecard. I do not believe however any President should be able to control the level of interest rates.
Tariff Impact?
August 1st is now in the rear-view mirror with many tariffs either in place or in place with continued negotiation. The original reciprocal rate of 10% has been reported higher to 15%. India has a rate of 25%, Switzerland 39% and others over the 15%.
The Fed and many others have suggested the impact of tariffs will increase the unemployment rate and the inflation rate, however temporarily. If last weeks job and inflation reports are the beginning of the “temporary” move higher, lets hope the time frame is short-lived and the forecast is accurate.
The bond market as of last Friday is now pricing in 2 rate cuts, beginning with September’s meeting. Bond market investors, at least for the moment, believe the jobs market and the economy are slowing.
For investors it always comes back to the same question. How will corporate profits be impacted? So far, so good!
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All data sourced from Wall Street Journal August 1, 2025.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested directly.
