250 Years in the Making

The Bureau of Labor Statistics (BLS) released its monthly Employment Situation Summary on Thursday, a day earlier than its normal first Friday of the calendar month due to the holiday. The data was decidedly mixed: Unemployment and underemployment ticked down from prior months, but total payroll growth for June (57,000 new jobs) came below expectations for 113,000 payroll additions. Further, May payrolls were revised down from 172,000 to 129,000. Finally, the labor force participation rate, or the percentage of eligible citizens working or actively looking for work, fell to 61.5%.¹

Industry trends were notable and diverse. The stalwart Health Care and Education sector (which the BLS aggregates) saw a robust 69,000 payroll addition, continuing that category’s strength that has only been interrupted one month in the last 18, by a healthcare provider workers’ strike. Professional and Business Services also showed strength, rising by 36,000 jobs. Leisure and Hospitality payrolls dropped by 61,000, and Information Technology remained in a downtrend, shedding 9,000 jobs.

Employment data is noisy; the BLS itself notes that 90% of the time, total headline payroll changes for a given month are plus or minus 122,000 jobs.²  We note that the World Cup may have skewed readings in April and May as North America geared up for the Tartan Army and Norway’s synchronized rowing fan bases. Additionally, June’s drop in Leisure and Hospitality may reflect a staffing buildup heading into the summer that may experience declines in coming months. Based on Northern Trust Wealth Management research, both three month average payrolls at the aggregate government and private sectors, plus three month average payrolls for the standalone private sector, are the second highest we have seen in the past 18 months, reflecting a healthy labor market in both supply and demand terms. 

For context, the European Central Bank (ECB) hosts an annual gathering, akin to the U.S. Federal Reserve Bank’s Jackson Hole summit. Policymakers, economists, market observers and the media gather to discuss papers on a myriad of current events, including economic growth, regulation, AI, asset tokenization and migration trends.³ While the summit’s theme centered on shaping Europe’s future, financial markets focused on Wednesday afternoon’s policy panel featuring Bank of England Governor Andrew Bailey, ECB President Christine Lagarde, Bank of Canada Governor Tiff Macklem and Fed Chairman Kevin Warsh. We note that CNBC’s Sara Eisen, a skilled interviewer (I have been grilled by Ms. Eisen several times, and she is always prepared and exacting in her questions), served as moderator during the panel discussion.

Readers may recall our comments following Chair Warsh’s first Federal Reserve Open Market Committee press conference in his new seat: We expect a more taciturn and opaque Fed as it relates to forward interest rate guidance. Chair Warsh did not submit forecasts through the every-other-meeting Fed Summary of Economic Projections released the day of his press conference debut, and despite Ms. Eisen’s best attempts, Warsh demurred on the July Fed policy outcome. However, Ms. Eisen’s questioning did reinforce that Warsh is encouraging new data sources and interpretations of data not prone to long time lags. Warsh also emphasized that “if people thought this central bank (the Fed) was going to be comfortable with an inflation objective above 2%, they would be disappointed.”⁴

Other salient takeaways include Lagarde acknowledging broadening inflation pressures despite the ECB Governing Council’s concerns on growth; Governor Bailey’s red flags on increased leverage through sources including sovereign debt buildup and financial market products; and Tiff Macklem underwriting the importance of trade and global interconnectedness.⁵

The bond market has had a lot to digest of late. Tentative peace in the Middle East, a more opaque Federal Reserve, divergent central bank activity (Japan and Europe raising rates while the U.S. and England remain on hold), and a decent but weaker-than-expected jobs report. Oil prices have been falling, yet regional Natural Gas prices remain elevated, and a heatwave in the U.S. coupled with driving season all leave market participants with open questions.

Investors have pushed out Federal Reserve interest rate hike expectations to a two-in-three chance of a rate hike by September and an 84% chance of a rate hike by October.¹⁰ Despite a modest push back in rate expectations based on the jobs report, markets are still anticipating a Fed largely held at bay, with current expectations that the Fed’s target rate will peak at 4% in the spring of 2027 from the current 3.6%.¹¹ Crude oil futures anticipate lower prices from a month ago given improved shipping trends, but we continue to emphasize regional energy cost disparities in areas like Europe. Cost push throughs in select industries (Apple, Microsoft) and tentative peace with Iran prior to negotiations grounded in nuclear arms likely leave the door open for more inflation risks to challenge current pricing, but we will gauge market expectations as the news cycle continues to produce change catalysts.

We do not discuss individual stock recommendations on these pages, but we do want to keep readers aware of developments that can shape the path forward. As we have discussed, our assessment of the AI ecosystem rests on the balance between supply and demand. We detailed last week that memory chips remain scarce, driving higher input costs for everything from mobile phones to gaming consoles. Company capital expenditures within AI continue to ramp higher, and while we view AI as a transformational technology, as analysts, we need to gauge the potential for industry supply to exceed demand.

Earlier this week, semiconductor device and AI leader Nvidia announced a partnership with software platform leader Palantir which will allow companies and agencies to run applications “while keeping data, models, and auditability under customer control.”¹² In other words, this partnership attempts to provide a client with software plus computing power in a self-hosted environment. An ongoing issue with AI demand has been data and intellectual property security, and while we don’t share this as an endorsement of this partnership, we note that ecosystem players are attempting to address risks that customers have voiced. AI customers have also become increasingly wary of data costs via token spend (the units by which model providers charge for by usage), so we will need to gauge how models like these may address commercial uptake trends. In short, the ecosystem continues to evolve, but the supply/demand equilibrium will remain our north star.

¹ U.S. Bureau of Labor Statistics. “Employment Situation Summary.” July 2, 2026. https://www.bls.gov/news.release/empsit.nr0.htm. Accessed 2 July 2026.

² U.S. Bureau of Labor Statistics. “Employment Situation Technical Note.” July 2, 2026. https://www.bls.gov/news.release/empsit.tn.htm. Accessed 2 July 2026.

³ The European Central Bank. “ECB Forum on Central Banking 2026.” June 29 – July 1, 2026.  https://www.ecb.europa.eu/press/conferences/html/20260629_ecb_forum_on_central_banking.en.html. Accessed 2 July 2026.

⁴ Ibid. Quote taken from Fed Chair Warsh panel comments, available on https://www.youtube.com/watch?v=KWKvOruDjd4. Accessed 2 July 2026.

⁵ Ibid.

⁶ Office of the United States Trade Representative. “Ambassador Greer Issues Statement on the USMCA Joint Review.” July 1, 2026. https://ustr.gov/about/policy-offices/press-office/press-releases/2026/july/ambassador-greer-issues-statement-usmca-joint-review. Accessed 2 July 2026.

⁷ United States Census Bureau. “Top Trading Partners- April 2026.” April, 2026. https://www.census.gov/foreign-trade/statistics/highlights/topyr.html. Accessed 2 July 2026.

⁸ Office of the United States Trade Representative. “Ambassador Greer Issues Statement on the USMCA Joint Review.” July 1, 2026. https://ustr.gov/about/policy-offices/press-office/press-releases/2026/july/ambassador-greer-issues-statement-usmca-joint-review. Accessed 2 July 2026.

⁹ The United States Federal Reserve. “Foreign Exchange Rates – H.10.” https://www.federalreserve.gov/releases/h10/weights/default.htm. Accessed 2 July 2026.

¹⁰ Northern Trust Wealth Management Research. Bloomberg World Interest Rate Probability Function, Accessed on Terminal 7/2/2026.

¹¹ Ibid

¹² Nvidia. “Open Models, Closed Environments: Palantir Brings Secure AI to US Agencies with NVIDIA Nemotron.” June 29, 2026. https://blogs.nvidia.com/blog/palantir-secure-ai-us-agencies-nemotron-open-models/. Accessed 2 July 2026.