Closing post
Time to wrap up…
US job growth slowed in June as employers added 57,000 new jobs – just about half of what economists had predicted – and the Bureau of Labor Statistics revised its figures from the past two months down by a total of 74,000.
The country’s unemployment rate dropped slightly to 4.2%, but the number of unemployed people changed little, according to the latest data, as 720,000 people left the labor force. The bureau revised the unexpectedly high May figures from 172,000 new jobs to 129,000, and revised the April figures from 179,000 to 148,000.
Though the numbers fell short of economists’s expectations, the average number of jobs added in the last three months was about 111,000, indicating a relatively strong job market despite economic uncertainty and higher inflation brought on by the war in the Middle East. The figures also remain much higher than the sluggish growth seen last fall and winter.
Hiring slowed despite expectations that the World Cup, and the US Independence Day celebrations, might have spurred bars and restaurants to take on more staff
Economists said the hiring slowdown could dampen expectations of increases in US interest rates to cool inflation.
In other news…
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The compensation scheme for victims of the UK’s motor finance scandal has been partially suspended, due to legal challenges.
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Default rates on UK credit cards have risen, and the situation is expected to get worse.
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…and diesel prices have fallen by the most in a month on record
James Knightley, ING’s chief international economist, has spotted that more Americans dropped out of the jobs market last month:
The unemployment rate dipped to 4.2% from 4.3%, but this was primarily caused by a big drop in the participation rate to 61.5% from 61.8% – ie not a good reason since it highlights worker disengagement.
In fact, the details show the number of people employed falling by half a million, while the number of people unemployed fell 213k, meaning more than 700k left the workforce.
The slowdown in hiring across America last month is due to the jump in motor fuel prices following the Iran war, says Steve Blitz, chief US economist at TS Lombard:
Chalk up the June weakness to high gasoline prices. When gas gets expensive, people eat out less.
We saw a bit of this in the May retail sales data – purchasing at gas stations was +3.4%, restaurants -0.1%. So, in June, the seasonal hires at restaurants and bars, despite the Knicks and the World Cup, fell short and the seasonally adjusted number was -32,900. If restaurant hiring was flat instead, total private would’ve been 82,000.
Good enough to keep everyone on the path of stable employment – which is where they should be. As gas prices come down and travel rebounds, expect better hiring at restaurants in July.
Wall Street gains on weak jobs report
Wall Street has opened higher, as investors hope that the slowdown in job creation last month will help ward off the risk of interest rate hikes.
The Dow Jones Industrial Average has gained 272 points, or 0.5%, to 52,578 points at the start of trading in New York.
The broader S&P 500 index is up 0.4%, while the Nasdaq was pretty much flat.
Susannah Streeter, chief investment strategist at Wealth Club, explains:
‘‘The US labour market has lost more momentum than expected, reigniting sparks of hope that the Federal Reserve will stay on the sidelines and put off rate hikes this year.
The weaker-than-expected rate of hiring may look like bad news for the economy, but it’s being read as good news by equity markets, given that it signals higher interest rates may already be doing the job of cooling the economy and that another significant increase in borrowing costs may not be required.
US real wages are falling
Today’s jobs report also shows that wages failed to keep pace with rising prices.
On an annual basis, average hourly earnings increased by 3.5% in June, which is notably weaker than inflation which rose by 4.2% in the year to May. That means real wages are falling.
James Bentley, director at Financial Markets Online, says:
“American workers’ average hourly earnings also rose by 3.5% over the past year. While this is below inflation and Americans are still getting poorer in real terms, it should be enough to keep the fires of consumer spending burning.
The large drop in employment at US accommodation and food services businesses suggests companies have not boosted their headcounts ahead of this weekend’s celebrations for the 250th anniversary of American independence.
Bradley Saunders, North America economist at Capital Economics, says:
The 57,000 rise in non-farm payrolls in June was notably weaker than the 110,000 consensus expectation, and was served with a combined 74,000 downward revision to prior months’ readings to boot.
What’s more, 47,000 of June’s rise came from healthcare & social assistance, with “cyclical” jobs growth slowing sharply to just 2,000. The main culprit was a 55,000 drop in accommodation and food services employment, more than reversing May’s rise. This was particularly notable given the backdrop of the FIFA World Cup and July 4th celebrations. Moves in other industries were generally minor, with professional and business services seeing the only significant change (+36,000).
Hopes of a World Cup hiring boost for the US economy have been dashed today, confirms Neil Birrell, CIO of Premier Miton.
“The World Cup was expected to have a positive effect on the US jobs market as the hospitality sector hired to cope with an influx of international fans; but that did not transpire, with payrolls rising by much less than expected in June, and the two month number also being revised downwards.
The jobs market is closely watched by the Fed and therefore everyone else, so this print will be seen as a good one for all those who are dovish on rates.”
Quilter: US jobs market may be showing the first signs of weakness
Today’s jobs report could be the “first signs of weakness” in the US labor market, warns Lindsay James, investment strategist at Quilter:
“The US jobs market may be showing the first signs of weakness, with nonfarm payroll numbers coming in at just 57,000, almost halving estimates of around 110,000. Meanwhile, the unemployment rate fell slightly to 4.2% from 4.3% previously, while hourly earnings were relatively steady at 3.5%, up from 3.4% last month.
“With the previous three US jobs reports all surprising to the upside - albeit with April and May both revised down in today’s print - the June report has broken that trend, raising questions over whether earlier data may have been supported by an element of demand being brought forward.
Nonetheless, the fundamental strength of the US economy has underpinned a level of market performance in the second quarter not seen since the post-pandemic rebound. However, it has also prompted the Federal Reserve to adopt a more hawkish tone in recent weeks, with its objective of maintaining price stability receiving far greater attention than the second mandate of maximising employment.
Dollar weakens
The US dollar is sliding on the foreign exchange markets, following the news that only 57,000 new jobs were created last month.
This has pushed the pound up to a two-week high of $1.3382, the highest since 17 June.
Traders are calculating that this hiring slowdown will take some pressure of the US Federal Reserve to raise interest rates in the coming months.
Where jobs were created, or lost, in the US last month
Employment in US professional and business services rose by 36,000 in June, today’s jobs report shows.
Social assistance added 25,000 jobs in June, primarily in individual and family services (+17,000).
Employment in health care rose by 22,000.
But… Leisure and hospitality employment declined by 61,000 in June, reflecting “weaker than usual seasonal hiring”.
Employment showed little or no change over the month in other major industries, including mining, quarrying, and oil and gas extraction; construction; manufacturing; wholesale trade; retail trade; transportation and warehousing; information; financial activities; other services; and government.
Updated
US unemployment rate drops to 4.2%
The US unemployment rate has dropped, even though hiring weakened in June.
The BLS reports that the jobless rate fell to 4.2% in June, from 4.3% in May. There were 7.094m people classed as unemployed, down from 7.307m.
US economy added fewer jobs than forecast in June
Newsflash: The US economy added much fewer jobs than expected in June, as hiring slowed.
US non-farm payrolls only expanded by 57,000 in June, the US Bureau of Labor Statistics reported, missing forecasts of a 110,000 increase.
According to the BLS, employment continued to trend up in professional and business services, social assistance, and health care. Leisure and hospitality lost jobs, despite the US co-hosting the men’s football World Cup.
Disappointingly, the previous two months’ jobs reports have been revised down.
The change in total nonfarm payroll employment for April was revised down by 31,000, from +179,000 to +148,000, and the change for May was revised down by 43,000, from +172,000 to +129,000.
The UK’s National Franchised Dealers Association (NFDA) has welcomed the partial suspension of the motor finance redress scheme.
Sue Robinson, chief executive of NFDA, says:
‘The Upper Tribunal’s decision to grant a partial suspension provides an essential operational pause for our members.
We encourage Dealerships to remain highly proactive in managing customer inquiries and maintaining precise historic records. Long-term certainty ensures that businesses and consumers alike can plan for the future with confidence.’
Despite the suspension of the motor finance compensation scheme, lenders involved will still need to keep working, explains Richard Pinch, senior director in the banking & credit advisory division of consultancy Broadstone:
“The FCA’s decision to partially suspend its motor finance redress scheme provides lenders with welcome operational clarity while the legal challenge is resolved. It removes the immediate pressure to calculate and pay compensation, helping firms avoid potentially duplicative work.
“However, lenders cannot afford to stand still ahead of the legal case at the end of this year or at the start of 2027. They will need to continue identifying eligible cases, gathering the necessary data and ensuring they have the operational capacity, capital and liquidity in place to respond quickly once the Tribunal reaches its decision.”
UK motor finance compensation scheme partially suspended
Newsflash: The compensation scheme for victims of the UK’s motor finance scandal has been partially suspended, due to legal challenges.
The Financcial Conduct Authority says the The Upper Tribunal (a UK court) has made an order suspending parts of the scheme, ahead of a hearing on the legal challenges to the compensation scheme.
That hearing will take place either on 14 to 18 December 2026 or 16 to 26 February 2027.
The FCA says this partial suspension means firms are not required to calculate or pay redress, or send communications about compensation owed under the scheme, until the Upper Tribunal process concludes.
It explains:
The partial suspension enables firms to keep preparing for the scheme and progress complaints as far as possible, while avoiding work that may need to be repeated if the challenges succeed. It also provides certainty for some consumers sooner, by requiring firms to tell complainants who are not owed compensation, subject to limited exceptions.
But, they must still identify relevant complaints and agreements, and gather the data needed to identify commission arrangements.
The four legal challenges are being brought by Consumer Voice, Volkswagen Financial Services, Mercedes Benz Financial Services, and Crédit Agricole Auto Finance.
The FCA had been expected to hand aggrieved borrowers £830 on average for each mis-sold loan through the scandal, in which drivers were overcharged for loans as a result of commission payments between lenders and car dealers between 2007 and 2024.
The financial regulator says a judgment is expected “in the following months” following the hearing. Until the legal process concludes, lenders do not need to calculate or pay compensation to people owed money under the scheme.
Updated
The pound has hit a one-year high against the euro, as the fall in the oil price dampens expectations of more interest rate rises in the eurozone.
The euro has slipped to as low as 85.47p, its lowest since June last year, which means one pound is worth €1.17.
Coffee hits five-month highs on crop concerns
Coffee drinkers face the prospect of higher prices, after coffee futures hits five-month highs today.
Robusta coffee hit a five-month peak of $3,920 a metric tonne, Reuters reports, adding:
Dealers noted there were concerns about the prospects for the 2026/27 crop in top robusta producer Vietnam.
“This year’s irregular rainfall and extreme heat have increased fungal diseases, raising concerns about production,” one trader in Vietnam said.
Rise in Divisia money growth 'creates breathing space for Burnham'
Professor Costas Milas, of the Management School at the University of Liverpool, has spotted some good news for the next prime minister:
Although the latest data suggests that business confidence has taken a hit, there is good news on mortgage rates (which are on their way down) and, at the same time, Divisia money growth is holding up rather well at 2.6 percent per annum.
This is good news. As I discuss in my latest (co-authored) LSE Business Review blog, Divisia money is a powerful measure of liquidity conditions in the UK economy which is currently ruling out a (material) hit to GDP growth.
This gives some material breathing space to prime minister (in waiting) Andy Burnham as long as he explains how he will finance his growth-enhancing devolution plans before financial markets revert to anxiety mood...
The Bank of England has also found that British lenders expect demand for new mortgages for house purchase to fall in the three months to the end of August.
Its quarterly Credit Conditions Survey shows that demand increased in the three months to the end of May, despite the rise in mortgage costs after the Iran war started.
Updated
UK credit card default rates are rising
Just in: Default rates on UK credit cards have risen, and the situation is expected to get worse.
New data from the Bank of England has found that default rates for total unsecured lending, including credit card defaults, rose in the April-June quarter.
Defaults for credit card were expected to increase and for other loans were expected to be unchanged in the third quarter of 2026, according to the BoE’s latest Credit Conditions Survey.
UK mortgage rates dip again today
UK mortgage rates have inched a little lower today, adding to yesterday’s drop.
Moneyfacts reports that the average 2-year, and 5-year, fixed residential mortgage rate have both dipped to 5.51%, down from 5.52% on Wednesday.
ECJ dismisses Google fight against €4.1bn antitrust fine
Newsflash: Europe’s largest court has refused to overturn a fine of more than €4bn (£3.5bn) imposed on Google for using its Android mobile operating system to thwart rivals.
The European Court of Justice has dismissed an appeal brought by Google and Alphabet against the penalty, which was imposed after the European Commission found that Google had acted anti-competitively by requiring that mobile phone manufacturers pre-install Google’s search and chrome apps on handsets as a condition for carrying Google’s Play app store.
The ECJ concluded that the EU general court had not erred in 2022 when it upheld the judgement (and reduced the fine from €4.34bn to €4.125bn)
The ECJ says (here):
The appeal brought by Google and its parent company Alphabet against the judgment of the General Court is dismissed, thereby confirming the penalty imposed for Google Search’s abuse of a dominant position in the context of the Android operating system
AI demand fears hit chip stocks,
A sell-off in chip stocks has hit Asia-Pacific markets today, as investors lose some enthusiasm for the AI trade.
South Korea’s SK Hynix tumbled by 14.5%, and Samsung lost 9.6%, dragging the KOSPI share index down by around 8% today – and wiping out some of its huge gains from the first half of this year.
This followed a drop in US chip company shares overnight, which knocked more than 6% off the Philadelphia Semiconductor Index.
The sell-off appears to be triggered by the news that Meta Platforms is building a cloud business to sell excess AI computing capacity.
That pushed up Meta’s shares by 9% – but Ipek Ozkardeskaya, senior analyst at Swissquote, says the deal rings alarm bells.
She suggests:
Meta has spent too much, eaten more than its stomach could take, and now needs to spit part of it out. It took debt on its shoulders along the way. It failed to release a go-to model, and it’s now moving to Plan B to make its investments worthwhile.
Plan B will cost the company, so in theory, Meta is arguably in a worse place than the company itself thought it would be. I didn’t get why it rallied 9% on yet another failed business attempt.
Updated
The cost of living squeeze has also eased a little in Switzerland.
Swiss inflation slowed in June for the first time in eight months, with consumer prices rose 0.5% from a year earlier, down from 0.6% in May.
That indicates the impact of lower oil costs are feeding through to the domestic economy, Bloomberg reports.
UK's Currys: memory chip shortage will mean price rises
While the cost of motor fuel are down, chip prices continue to climb amid a scramble for semiconductors.
The boss of retailer Currys has warned that that global shortages of memory chips will mean some price rises for consumer electrical products.
Currys CEO Alex Baldock told BBC radio:
“AI and data centres are eating up the world’s supply of silicon, leaving less for the likes of mobile phones and laptops which does create availability challenges and will produce some cost price inflation.
“Inevitably there are going to be some price rises but we’re in a pretty good position to dampen that as much as possible.”
Currys also reported a rise in profits this morning – up to £153m in the y to 2 May 2026, up from £124m a year earlier.
UK business confidence slumps to near four-year low
UK business confidence has sunk to a near four-year low as firms count the mounting cost of the Iran war.
Accountancy group ICAEW has reported that weaker expected sales activity, rising costs pressures, and growing geopolitical turbulence was weighing on bosses’s minds.
Sentiment hit its lowest level since the fourth quarter of 2022, according to ICAEW’s Business Confidence Monitor (BCM).
ICAEW reports:
Geopolitical risks were the biggest growing challenge to performance with 65% of companies citing this as an issue, likely reflecting the fallout from the Iran conflict and increasing domestic uncertainty as a change of prime minister looms large.
Labour costs (58%) were the second biggest challenge amid the notable minimum wage increase during the survey period, followed by energy costs with the percentage of firms highlighting this issue rising sharply from 35% in Q1 to 55% in Q2. The closure of the Strait of Hormuz and rising fuel prices meant the share of businesses citing transport worries nearly doubled from 11% to 20%, the highest for over two years.
Analyst: Brent may rise back over $80 soon
Investment bank Shore Capital suspect the fall in the oil price may have gone too far.
Brent crude has dropped from around $110 a barrel in mid-May to below $71 a barrel today – Shore analyst James Hosie reckons it may rise back over $80 a barrel once the boost from reopening the strait of Hormuz ends.
In a research note titled They think it’s oil over, Hosie writes:
Rapid decline to low $70s may be an over-correction - Near term oil prices have declined by over 15% following the mid-June US-Iran ceasefire agreement that has enabled the gradual resumption of transit through the Strait of Hormuz and reduced the threat of a fresh escalation in the military conflict.
In our view, the sharp drop in oil prices has been driven by the release of oil tankers previously stuck in the Gulf back onto the global market, including Iranian cargoes that are currently sanction free.
As this initial supply boost passes, we anticipate a rise in Brent prices back above $80 per barrel based on a gradual recovery of Persian Gulf oil production.
UK mortgage rates down too
It’s not just motor fuel prices that are falling.
The average cost of a fixed-rate UK mortgage dipped again yesterday, to 5.52% for both two-year and five-year loans.
That’s down from 5.68% for a two-year mortgage at the start of June, and 5.63% for a five-year.
Rates have been pulled down by the fall in the oil price, which has eased inflation expectations among investors.
There’s some way to go, though, to return to pre-Iran war levels. Back on 27 February, the day before the conflict, the average 2-year fixed residential mortgage rate was 4.83%.
Introduction: UK diesel prices record biggest monthly drop on record, RAC says
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
The plummeting oil price has lead to widespread price reductions for motorists filling up their fuel tanks in the UK in June.
The average price of diesel fell nearly 17p a litre in June, the RAC reports this morning, which is the biggest fall in a single month since 2000. During June, diesel fell from 183.75p a litre at the start of the month to 167.14p a litre by its end, a drop of 16.6p.
That followed sharp falls in the crude oil price – which slumped by 20% in June.
The average price of petrol fell too, by 8p a litre in June – falling from 159.37p to 151.40p a litre.
RAC head of policy Simon Williams said:
“June has been a far better month for drivers on the back of the announcement of a deal between the US and Iran to end the conflict. The price of oil has fallen dramatically and prices at the pumps have reflected that.”
Diesel is nasty stuff, of course – diesel engine exhaust is classed as carcinogenic to humans by the World Health Organisation, while the Dieselgate scandal is estimated to have killed about 16,000 people in the UK and caused 30,000 cases of asthma in children.
But, swathes of the UK economy run on the stuff – diesel’s used by long-haul trucks in the commercial freight and logistics world, for buses and coaches, and for passenger cars (although sales have been falling in recent years).
So, cheaper diesel should ease the cost pressures buffeting UK households and businesses.
Crude oil is trading at $70.70 today, cheaper than just before the Iran war started.
Diesel and petrol price, though, are still higher than before the conflict began.
Williams explains:
“At the time the conflict began drivers had average prices of 132p for unleaded and 142p for diesel, so we’re still some way off those levels.
“As things stand, petrol should dip under 150p soon and diesel ought to get to below 160p but we would need the price of oil to fall further to see a return to the pre-conflict prices.”
The agenda
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9.30am BST: BoE credit conditions survey
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1.30pm BST: US non-farm payrolls jobs report for June
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1.30pm BST: US initial jobless claims data
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3pm BST: US factory orders for May
