Nonfarm Payrolls Rise by 147,000, Surpassing Expectations
Unemployment Rate Falls from 4.2% to 4.1%
Initial Jobless Claims Hit Six-Week Low
July Rate Cut Expectations Fade; 93% Chance of Hold
House Tax Cut Vote and Additional Trade Deals in Focus
The three major indices on the New York Stock Exchange rose on July 3 (local time). Investor sentiment improved as optimism spread that the U.S. economy remains resilient, following increased employment and a drop in the unemployment rate for June. However, due to the "surprise" jobs report, the possibility of an early rate cut in July has faded, causing U.S. Treasury yields to rise.
As of 10:25 a.m. on the same day in the New York stock market, the blue-chip Dow Jones Industrial Average was up 302.63 points (0.68%) from the previous trading day at 44,787.05. The large-cap S&P 500 index rose 43.69 points (0.7%) to 6,271.11, while the tech-heavy Nasdaq index climbed 187.16 points (0.92%) to 20,580.29.
U.S. employment last month showed unexpected strength. On this day, the U.S. Department of Labor announced that nonfarm payrolls increased by 147,000 in June 2025. This figure significantly exceeded Bloomberg's forecast of 106,000 and was also higher than the May figure of 144,000. The May nonfarm payroll increase was also revised up from the initial 139,000 to 144,000. The unemployment rate fell from 4.2% in May to 4.1% in June. The market had expected the unemployment rate to rise slightly to 4.3% last month, reaching its highest level since 2021, but instead, it unexpectedly dropped by 0.1 percentage point. This signals that the labor market remains robust despite President Donald Trump's aggressive tariff policies.
This was particularly noteworthy as it reversed the weak employment data released the previous day. According to private labor market research firm ADP, new private sector jobs in June decreased by 33,000, raising concerns about a slowdown in hiring. However, the Department of Labor's nonfarm payrolls showed an unexpected increase, confirming that the labor market remains solid. The Department of Labor's data reflects employment trends more accurately as it includes both private and public sectors.
The Department of Labor also reported that initial jobless claims for the week of June 22-28 stood at 233,000, slightly below the market forecast of 240,000. This is the lowest level in six weeks since mid-May. However, continuing jobless claims?those who have filed for unemployment benefits for more than two weeks?reached 1,964,000, the highest in about four years, surpassing expert expectations of 1,960,000.
With the strong employment data, market expectations that the Federal Reserve (Fed) would cut its benchmark interest rate in July quickly diminished. According to the CME FedWatch tool, immediately after the jobs report was released, the probability of a July rate cut dropped sharply to 6.7% from 23.8% the previous day. The probability of rates remaining unchanged reached 93.3%. The likelihood that the Fed will keep rates unchanged in September also surged from 6.3% the previous day to 27.7% on this day.
As expectations for a rate cut receded, U.S. Treasury yields climbed. The yield on the benchmark 10-year Treasury note rose 6 basis points (1bp = 0.01 percentage point) from the previous day to 4.35%, while the yield on the policy-sensitive 2-year Treasury note jumped 10 basis points to 3.89%.
Samir Samana, senior global market strategist at Wells Fargo Investment Institute, commented, "The labor market continues to maintain a solid foundation," adding, "This data reinforces the Fed's wait-and-see stance, making a July rate cut unlikely."
Investors are awaiting news on the U.S. House of Representatives' tax cut bill and additional trade negotiations by the Trump administration. On this day, the House passed a "procedural vote" on the tax cut bill, a key policy agenda of President Trump, and plans to bring it to a final vote in the full chamber. If the House passes the revised tax bill previously approved by the Senate, it will become law upon President Trump's signature. As the tax cut bill is expected to increase the fiscal deficit, attention is focused on how the Treasury market will react. In addition, after the U.S. reached a second trade agreement with Vietnam the previous day, there is growing anticipation for another deal before the mutual tariff suspension expires on July 8.
By sector, Cadence Design Systems, a semiconductor design software supplier, is up 4.59%. Synopsys is up 4.19%. Their share prices are rising as the U.S. government has lifted export restrictions on semiconductor design software to China. Nvidia is up 2.1%. Tesla is down 0.47%.
The New York Stock Exchange will close early at 1 p.m. on this day ahead of the Independence Day holiday on July 4.
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