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Fed independence and US rule of law at risk, according to UBS reserve managers survey

A sign for the Federal Reserve Board of Governors is seen at the entrance to the William McChesney Martin Jr. building in Washington, D.C. — REUTERS

LONDON — Two in three reserve managers fear US Federal Reserve independence is at risk and nearly half think the rule of law in the United States may deteriorate enough to influence their asset allocation significantly, UBS Asset Management said in a survey on Thursday.

And 35% of close to 40 central banks that responded think that the US might ask allies to convert longer-term debt into other instruments such as ultra-long, zero-coupon bonds.

The results highlight growing concern around the safe haven status of the world’s No. 1 reserve currency and biggest bond market given US President Donald J. Trump’s confrontations with long-standing allies over trade and security, and his attacks on the Fed.

Trump’s April 2 Liberation Day tariffs hit both the dollar and Treasuries. He has also pressured the Fed to cut rates and his advisers have floated unorthodox ideas to bring the ballooning US debt pile under control.

Max Castelli, head of global sovereign markets strategy and advice at UBS Asset Management, said the concerns showed it was “very clear” how Liberation Day had changed reserve managers’ view on the dollar.

Going forward, 29% were looking to cut exposure to US assets in response to recent developments, the survey said.

Over the next year however, 25% of central banks said they expected to cut their exposure to the dollar, after stripping out those who want to increase it, slightly less than the past year.

“When you ask: do you see really a big change in the dominance of the dollar? The answer is no,” Mr. Castelli said, adding it takes time for reserve managers to move.

Nearly 80% of respondents expect the dollar, which currently accounts for 58% of FX reserves, to remain the global reserve currency.

In the coming year, gold, which UBS ranked against other non-currency assets, was the top winner, with 52% of central banks looking to add it to their holdings.

And 39% of respondents were planning to increase the share of gold reserves they hold domestically, the survey showed.

Mr. Castelli said that reflected mainly emerging markets central banks worried about sanction risk, and mainly concerning gold stored in the United States.

Mr. Trump’s policies have also revived questions in Germany around its central bank’s gold reserves, some of which are stored at the New York Fed.

Over the next five years, reserve managers reckon the euro will benefit the most from global shifts, followed by the renminbi and crypto assets, the UBS survey showed.

The dollar dropped from top spot last year to ninth place.

But over the next year, only a net 6% of respondents plan to add the euro, while the renminbi took the top spot with 25%. The Canadian dollar, pound and yen were other currencies that a higher net percentage of respondents were looking to add.

“There is a lot of optimism about Europe. But the expectations are very high, in the sense that if Europe does not deliver on reform, I think this European renaissance will be rather short-lived,” Mr. Castelli said. — Reuters

Manga doomsday prediction spooks some tourists to Japan

A MAN wearing a protective face mask walks through red-colored wooden torii gates at the Nezu shrine in Tokyo, Japan. — REUTERS/STOYAN NENOV

TOKYO/HONG KONG — Viral rumors of impending disaster stemming from a comic book prediction have taken the sheen off Japan’s tourism boom, with some airlines cancelling flights from Hong Kong where passengers numbers have plunged.

Japan has seen record numbers of visitors this year, with April setting an all-time monthly high of 3.9 million travelers.

That dipped in May, however, with arrivals from Hong Kong — the superstitious Chinese-controlled city where the rumors have circulated widely — down 11% year-on-year, according to the latest data.

Steve Huen of Hong Kong-based travel agency EGL Tours blamed a flurry of social media predictions tied to a manga that depicts a dream of a massive earthquake and tsunami hitting Japan and neighboring countries in July 2025.

“The rumors have had a significant impact,” said Mr. Huen, adding that his firm had seen its Japan-related business halve. Discounts and the introduction of earthquake insurance had “prevented Japan-bound travel from dropping to zero,” he added.

Hong Kong resident Branden Choi, 28, said he was a frequent traveler to Japan but was hesitant to visit the country during July and August due to the manga prediction. “If possible, I might delay my trip and go after September,” he said.

Ryo Tatsuki, the artist behind the manga titled The Future I Saw, first published in 1999 and then re-released in 2021, has tried to dampen the speculation, saying in a statement issued by her publisher that she was “not a prophet.”

The first edition of the manga warned of a major natural disaster in March 2011. That was the month and year when a massive earthquake, tsunami and nuclear disaster struck Japan’s northeastern coast killing thousands.

Some have interpreted the latest edition as predicting a catastrophic event would occur specifically on July 5, 2025, although Mr. Tatsuki has denied this.

Situated within the Pacific Ocean’s “Ring of Fire,” Japan is one of the most earthquake-prone countries in the world. In recent days there have been more than 900 earthquakes, most of them small tremors, on islands off the southern tip of Kyushu.

But Robert Geller, a professor at the University of Tokyo who has studied seismology since 1971, said even scientifically based earthquake prediction was “impossible.”

“None of the predictions I’ve experienced in my scientific career have come close at all,” he said.

Nevertheless, low-cost carrier Greater Bay Airlines became the latest Hong Kong airline on Wednesday to cancel flights to Japan due to low demand, saying it would indefinitely suspend its service to Tokushima in western Japan from September.

Serena Peng, 30, a visitor to Tokyo from Seattle, had initially tried to talk her husband out of visiting Japan after seeing the social media speculation.

“I’m not super worried right now, but I was before,” she said, speaking outside Tokyo’s bustling Senso-ji temple. — Reuters

Saudi Arabia, Indonesia sign several deals worth around $27 billion

An Indonesia Rupiah note is seen in this picture illustration June 2, 2017. — REUTERS/THOMAS WHITE/ILLUSTRATION

CAIRO — Saudi Arabia and Indonesia signed several deals and memorandums of understanding worth around $27 billion between private sector institutions in fields including clean energy and petrochemicals, Saudi state news agency SPA reported on Wednesday.

Indonesian President Prabowo Subianto visited the Gulf kingdom on Wednesday and met Saudi Crown Prince Mohammed bin Salman.

The two sides also agreed to bolster cooperation in the supply of crude oil and its derivatives, improve supply chains and their sustainability in the energy field and strengthen cooperation in mineral resources, the Saudi state news agency said.

Trade between the two countries amounted to around $31.5 billion in the last five years, according to SPA.

Saudi Arabia’s ACWA Power signed initial agreements to explore investment opportunities into renewable energy projects with sovereign wealth fund Danantara Indonesia and state energy firm Pertamina, according to a statement from Danantara.

The companies are expected to explore potential investments with up to $10 billion worth of project funding, Danantara added. — Reuters

Climate and empowering women must be a priority, development bank bosses say

STOCK PHOTO | Image from Freepik

SEVILLE — Multilateral development banks (MDB) need to sharpen their focus on delivering climate action and on empowering women, the heads of two major MDBs in Asia and Europe told Reuters, as they face calls to be bolder, more flexible and inclusive.

The president of the European Investment Bank (EIB), Nadia Calvino, and of the Asian Infrastructure Investment Bank (AIIB), Jin Liqun, spoke on the sidelines of the once-a-decade United Nations (UN) development financing summit taking place in Seville.

The event is overshadowed by criticisms it has shown a lack of ambition and by the absence of the United States, the biggest provider of international aid until US President Donald J. Trump returned to office early this year.

Mr. Trump has also withdrawn the United States from UN efforts to counter climate change and sought to reverse policy on inclusivity, making many companies and institutions across the globe reticent about championing diversity and sustainability.

The AIIB’s Jin welcomed civil society’s push for MDBs to do more on climate as a “positive force for innovation and greater impact.”

The AIIB supported “climate-resilient” infrastructure under a broader definition that includes digital, health, and education infrastructure, he said.

The EIB’s Calvino said high-level climate commitments must translate into tangible investments and projects, naming as an example an initiative for climate-related debt clauses that allows vulnerable countries to pause repayments after disasters.

The pre-summit outcomes agreement between UN members included a pledge to triple multilateral lending capacity. The US said that crossed one of its red lines as it interfered with the MDBs’ independence.

Asked about French President Emmanuel Macron’s call for MDBs to sacrifice stellar credit ratings to hit those new targets, Mr. Jin proposed rating agencies apply different standards to MDBs instead of those used for commercial banks or private companies.

Ms. Calvino said the current system worked well, with the EIB’s AAA rating enabling it to take on higher-risk investments and leverage European Union guarantees.

The US also objected to the use of the word gender in the outcomes document, saying it did not support “sex-based preferences.”

Ms. Calvino, the EIB’s first woman president, said empowering women was “both the right and the economically smart choice… a no-brainer.”

Mr. Jin said female empowerment was key in the AIIB’s investment decisions, pointing to a rural road project in Ivory Coast connecting female agriculturalists in previously isolated villages to main markets to sell products such as cashews and coffee beans. — Reuters

When the pandemic gave lemons, Sonya’s Garden chose to reinvent

“Sonya’s Garden did not sit back during the pandemic and the 2020 Taal Volcano eruption; instead, they chose to reinvent, said owner Sonya Garcia.

Interview by Edg Adrian Eva
Video editing by Arjale Queral

Tenable flags AI cloud threats with Southeast Asia in the crosshairs

STOCK IMAGE | Image by Gerd Altmann from Pixabay

Cloud-based artificial intelligence (AI) systems are more vulnerable to cyber threats than traditional cloud setups, prompting regulators in Southeast Asia, like the Philippines, to be on heightened alert, according to US-based cybersecurity firm Tenable. 

In a report released on Tuesday, Tenable said that 70% of AI cloud workloads have at least one unpatched critical vulnerability, compared to 50% in their non-AI counterparts. 

The findings were found on AI workloads across Amazon Web Services (AWS), Microsoft Azure, and Google Cloud Platform (GCP), posing increased security risks for organizations in Singapore and Southeast Asia amid accelerated AI adoption in the region. 

“AI workloads, with their vast training datasets and model development processes, are an increasingly attractive target for threat actors,” Tenable said in a statement.  

It added that 77% of organizations using Google’s Vertex AI Workbench had at least one notebook instance with an overprivileged default service account, which could allow attackers to gain more access and move across cloud systems. 

Regulators across Southeast Asia are placing greater attention on addressing these risks. In the Philippines, the Data Privacy Act and Bangko Sentral ng Pilipinas (BSP) regulations emphasize data classification, strong authentication, and robust third-party governance.  

Similarly, Singapore’s Cybersecurity Act and the Monetary Authority of Singapore’s (MAS) Technology Risk Management Guidelines mandate strict cloud and AI security controls. 

Despite the risks, the report also shows progress in addressing so-called “toxic cloud trilogies,” which refer to systems that are publicly exposed, critically vulnerable, and highly privileged. The number of surveyed organizations affected dropped to 29%, down from 38% the year before. 

“Tenable’s researchers attribute the nine-point decline to sharper risk-prioritization practices and wider use of cloud-native security tooling,” Tenable said. 

The report warns that even a single toxic cloud trilogy can give attackers quick access to sensitive data. 

The cybersecurity firm also reported that 83% of AWS users have configured at least one identity provider (IdP), yet credential abuse still accounts for 22% of breaches, highlighting the need for strong multi-factor authentication and least privilege access. 

“Organizations have made real strides in tackling toxic cloud risks, but the rise of AI workloads introduces a fresh wave of complexity,” Ari Eitan, Director of Cloud Security Research at Tenable said.  

He added that AI’s large data requirements and common security flaws require greater caution, and that exposure management helps security teams protect important data within AI systems. – Edg Adrian A. Eva

Albert Martinez joins Assurance Philippines as BoD, CMO to drive insurance accessibility

From left to right: Assurance PH Sales Manager Angelica Megui, Assurance PH Soliciting Officer Jeffrey Ejercito, Assurance PH President Melody Antonio, Assurance PH Chief Marketing Officer & Board of Director Albert Martinez, Assurance PH Business Development Manager Joyce Lazaro, and Assurance PH Claims Officer Sam Sangalang

In a strategic move signaling the evolution of the Philippine insurance industry, veteran actor and seasoned marketing professional Albert Martinez has been appointed Chief Marketing Officer (CMO) and Board Director of Assurance Philippines, a rising player redefining non-life insurance for the Filipino market.

Assurance Philippines leverages technology to challenge the industry’s traditional structures, offering flexible, usage-based insurance coverage that empowers consumers to pay only for what they use. By breaking away from rigid, fixed annual premiums, the company aims to bring insurance within reach for millions of underserved Filipinos — a demographic historically excluded by cost and complexity.

“I’m thrilled to help make insurance simpler, more relatable, and ultimately more attainable for every Filipino,” said Mr. Martinez, whose appointment reflects the company’s commitment to merging innovation with inclusivity. His broad public influence and strategic marketing insight are expected to accelerate Assurance’s efforts to reshape public perceptions of insurance as a necessity rather than a luxury.

Industry analysts view Mr. Martinez’s entry as a key inflection point for Assurance, positioning the company as a formidable force in a market where insurance penetration remains significantly below global averages. The company’s tailored, digital-first products directly address the financial realities of Filipino consumers, especially amid an increasingly dynamic economic landscape.

Joining Mr. Martinez on the board are Assurance Founder Christian Bradley and Board Director Jomel Paradero, forming a dynamic leadership team with a bold vision: to close the country’s protection gap and redefine financial resilience for everyday Filipinos through smarter, fairer coverage. With their combined expertise, they are dedicated to transforming the landscape of insurance in the Philippines.

Assurance Philippines also strategically partnered with Milestone Guarantee and Assurance Corp. and FPG Insurance to further strengthen their service capabilities towards their growing client base. The key partnerships will ensure that Assurance will be able to cater to the demands for their services nationwide.

As the Philippine insurance sector undergoes much-needed disruption, Assurance Philippines stands at the forefront, delivering accessible, tech-enabled solutions that make peace of mind more accessible for all Filipinos. With these innovations, Assurance is poised to redefine the future of insurance in the country.

Assurance is also preparing to launch its mobile app to enhance accessibility and provide a more convenient, user-friendly platform for customers to manage their insurance needs.

 

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When the pandemic gave lemons, Sonya’s Garden chose to reinvent

“Sonya’s Garden did not sit back during the pandemic and the 2020 Taal Volcano eruption; instead, they chose to reinvent, said owner Sonya Garcia.

Interview by Edg Adrian Eva
Video editing by Arjale Queral

South Korea’s Lee pledges ‘bold’ economic policy after martial law crisis

SOUTH KOREA’S President Lee Jae-myung delivers a speech after taking his oath during his inauguration ceremony at the National Assembly in Seoul on June 4, 2025. — REUTERS

SEOUL – South Korean President Lee Jae Myung vowed on Thursday to implement a “bold” fiscal policy to boost a flagging economy after the country’s martial law crisis and to tackle challenges posed by looming U.S. tariffs and North Korea.

Mr. Lee, who was elected on June 3 in a snap election, said it was his top priority to improve the lives of the people, whose faith in government had been greatly shaken by “a national crisis” that hammered Asia’s fourth-largest economy.

“It is a time when the proactive and bold role of national finance is more important than ever,” Mr. Lee, who has pledged to implement expansionary fiscal policy, said in his opening remarks at a news conference to mark 30 days in office.

Mr. Lee’s predecessor, Yoon Suk Yeol, declared martial law in December, shocking a nation that had come to pride itself as a thriving democracy having overcome military dictatorship in the 1980s and triggering an unprecedented constitutional crisis.

Mr. Lee’s administration has proposed $14.7 billion of extra government spending to support sluggish domestic demand. Parliament, controlled by his Democratic Party, is expected to vote on the budget bill soon.

The president also said in his opening remarks that he was doing his best to achieve a “mutually beneficial and sustainable” outcome from trade negotiations with the United States.

South Korea is hoping to contain the impact of U.S. President Donald Trump’s threatened punishing tariffs that could weigh on an export-reliant economy with major semiconductor, auto and steel industries.

 

US TARIFF TALKS

Mr. Lee said tariff negotiations with the United States had “not been easy,” and he could not say if an agreement was possible in time for Washington’s July 8 deadline when tough reciprocal import duties are set to kick in.

During high-level trade talks last month, Washington raised issues related to South Korea’s non-tariff barriers, as Seoul already imposes nearly zero tariffs on U.S. imports under a free trade agreement, a senior South Korean trade official has said.

South Korea’s top trade envoy Yeo Han-koo said on Thursday that Seoul wanted to ensure that it was not put at a comparative disadvantage as other major countries conduct last-minute trade negotiations with the United States.

Mr. Lee, a liberal former human rights lawyer, said the alliance with the United States was the cornerstone of his foreign policy, but pledged a pragmatic approach as the basis of a speedy effort to improve ties with China and Russia.

Peace with North Korea was not only a national security priority, but a crucial part of a “virtuous cycle of peace and economic growth,” he said.

Mr. Lee said tension with Pyongyang has had a real negative economic impact despite South Korea’s strong military capabilities, funded by a defence budget larger than the North’s total economic output.

“Even if you’re at war, you have to have diplomacy and dialogue. To completely cut off dialogue is truly foolish,” Lee said when asked about his plans on relations with Pyongyang. The two Koreas remain technically in a state of war under a truce that ended fighting in 1953.

He said he had been surprised by the swift response from North Korea after he suspended loudspeaker propaganda broadcasts directed across the border and said he would take additional steps to ease tensions.

Under Mr. Yoon, who took a hard line against Pyongyang, the two sides scrapped a 2018 military agreement that sharply escalated hostility. – Reuters

The Italian job: how Rome plans to work around NATO spending hike

THE ITALIAN and European Union flags flutter in the wind at the Quirinale presidential palace in Rome Jan. 28, 2015. — REUTERS

ROME – Italy, along with other NATO countries, has agreed to sharply increase defense spending over the next decade, but Giorgia Meloni’s government is already working on imaginative ways to minimize any hit to its strained public finances.

Unlike Spain, which openly said it could not go much above the old NATO target of 2% of national output, at a summit last week Italy toed the line imposed by U.S. President Donald Trump, committing to 5% by 2035 – at least on the surface.

Ms. Meloni, aware that opinion polls show raising defense spending is highly unpopular among Italians, sought to reassure them after the NATO summit.

“These are necessary expenses, but we are committed to not diverting even a single euro from the government’s other priorities,” she told reporters.

Italy’s defense spending amounted to just 1.5% of output in 2024, near the low end of the 32 NATO members.

The government this year met the previous 2% target by a raft of accounting changes, factoring in previously excluded items such as soldiers’ pensions and the coastguard.

But hitting the new goal will be far more difficult. On paper, it would require an increase in spending of more than 60 billion euros ($71 billion), a huge task for a country with the euro zone’s second largest debt pile, at 135% of output.

The European Commission, which is also urging EU states to hike defense spending, has adopted a so-called “escape clause” from its fiscal rules to allow increases of 1.5% of gross domestic product per year through 2028.

Italy, however, has less scope to use this clause because its deficit is already considered too high.

 

CIVILIAN INFRASTRUCTURE

Italian officials said Ms. Meloni would double down on this year’s approach by including items already budgeted for that have at best a tenuous link to defense, hoping the tactic is accepted by NATO and the European Commission.

Italy, the euro zone’s third largest economy, could prove a litmus test for other NATO countries that have also signed up to the 5% goal but face an uphill struggle to reach it.

Rome is considering civilian infrastructure such as ports, shipyards, and even an ambitious, long-planned bridge connecting Sicily to the mainland, officials said.

Overall, Italy plans to invest 206 billion euros to upgrade its railways and a further 162 billion for its roads and motorways, according to a parliamentary study based on government data. Many of these projects could now receive the defence and security label.

“A large part of planned infrastructure investments fall within the NATO parameters because they have dual-use applications,” Deputy Transport Minister Edoardo Rixi told Reuters.

In response to a Reuters request for comment, the EU Commission said it was for Italy to determine whether an infrastructure’s main purpose was military or civilian.

A NATO official said countries must have “a credible path” to achieve their defence spending pledges “and they will provide plans on how they will support increases in their defence investments each year”.

In promising remarks for Italy’s plans, he added: “We need civilian transportation networks that can support military mobility. As well as tanks, fighters and warships, we need roads, rail, and ports.”

Italy has already identified necessary strategic infrastructure projects worth a massive 483 billion euros to be completed over future years, meaning there is no shortage of potential schemes to be included.

 

PLAYING FOR TIME

The new NATO target includes a core component for defense spending, which must reach 3.5% of GDP by 2035, and a further element on broader security-related investments, worth 1.5%.

Upgrading ports in the northern cities of Trieste and Genoa, as well as a shipbuilding and maintenance hub in nearby La Spezia, would be eligible for meeting NATO criteria, Rixi said.

“If you need to build, repair and maintain military ships as well as transport troops and military equipment, you need to have adequate infrastructures to do so,” he said.

Time is also a key factor. With the centre-left opposition saying defence spending will subtract resources from the welfare state, Meloni wants to delay any increases until after the next election due in 2027, officials said.

“The real challenge for Meloni is not the amount but the timing,” said Francesco Galietti, founder of Rome-based political risk think-tank Policy Sonar.

In 2027 Italy will also be able to fully tap the EU’s fiscal leeway “escape clause”, provided it gets its deficit below 3% of GDP in 2026 as planned.

For this reason, Rome successfully lobbied NATO allies to avoid a minimum annual defence spending increase being imposed, an official with knowledge of the negotiations said, adding that Rome was also instrumental in delaying the 5% target year to 2035 from a previously planned 2032.

“The message is clear, Italy will do what it must to meet its NATO commitments, but it will do so in its own time,” Mr. Galietti said. – Reuters

Hong Kong retailers under strain as changing trends drive store closures

CITYSCAPE view of the Victoria Harbour region in Hong Kong. —MANSON YIM-UNSPLASH

HONG KONG – Hong Kong’s retailers are battling against shifting consumer habits, as visitors spend less and locals head across the border to China for cheaper dining and shopping, leading to a wave of store closures.

A 36-year-old Chinese seafood restaurant chain and a popular high-end food court in the bustling Causeway Bay district closed this week.

Other recent closures in the financial hub include cinema chains, a major catering group, a 41-year-old bakery and a three-decade-old congee chain.

Weak domestic spending and cheaper prices in Shenzhen, bordering Hong Kong, have compounded retailers’ woes, according to industry figures and analysts.

Furthermore, China’s economic slowdown, U.S.-China geopolitical tensions and a national security clampdown have also weighed on business sentiment and hurt Hong Kong’s small and open economy. The city’s GDP is forecast to grow between 2%-3% this year, compared with 2.5% last year and 3.2% in 2023.

“The change in consumption patterns is irreversible,” said Annie Yau Tse, chairwoman of Hong Kong’s Retail Management Association.

Hong Kong was once a prime destination for high-spending mainland visitors but mass anti-government protests in 2019 and COVID restrictions led to a decline in its appeal.

The authorities have launched initiatives to revive tourism, including hosting large-scale events such as Coldplay concerts and a Manchester United exhibition match at a new harborside stadium.

While visitors are returning to near 2018 levels with May arrivals up 20% to 4.08 million visitors versus 4.95 million in 2018, spending remains soft.

Retail sales by value rose 2.4% in May from a year earlier to HK$31.3 billion ($4 billion), the first rise in 14 months, government data showed on Wednesday. However, it remains only around 77% of the HK$40.5 billion in May 2018.

“We are trying hard to think of ways to turn the traffic into business,” Yau Tse said.

Jack Tong, director of Savills Research & Consultancy, said the recent string of closures was due to a “structural shift in the local retail market” starting from 2023.

It is “no longer strong enough to support such retail trades and would be beyond repair even by further reducing rents.”

Overall prime street rents in the first quarter have fallen back to 2003 levels, he said.

“The rise in local outbound travel in Hong Kong and changes in mainland tourists’ spending patterns and preferences in Hong Kong and Macau continued to weigh on the overall retail sector during the financial year,” jeweler Chow Tai Fook said.

Last month, Cafe de Coral reported a 29.6% drop in net profit for the 2024/25 year ended in March, citing a weak economy and consumer sentiment.

Despite the tough conditions, some signs of recovery are emerging.

Vipul Sutariya, who attended the jewelry fair in June, said Chinese dealers were back at the fair “not to buy immediately but to ask, which is the biggest change in the past 1.5 years,” he said. “In my view that’s a good sign.” – Reuters

US job growth expected to slow in June, unemployment rate forecast to rise

PRESSFOTO-FREEPIK

WASHINGTON – The U.S. labor market likely slowed further in June, with the unemployment rate expected to have edged up to more than a 3-1/2-year high of 4.3%, as economic uncertainty stemming from the Trump administration’s policies curbed hiring.

The anticipated moderation in job growth will probably be insufficient to spur the Federal Reserve to resume its interest rate cuts in July, with the Labor Department’s closely watched employment report on Thursday also expected to show solid wage gains last month.

The report is being published early because of the Independence Day holiday on Friday. A string of indicators, including the number of people filing for state jobless benefits and receiving unemployment checks, has pointed to labor market fatigue after a strong performance that shielded the economy from recession as the U.S. central bank aggressively tightened monetary policy to combat high inflation.

Economists say President Donald Trump’s focus on what they call anti-growth policies, including sweeping tariffs on imported goods, mass deportations of migrants and sharp government spending cuts, has changed the public’s perceptions of the economy. Business and consumer sentiment surged in the wake of Trump’s victory in the presidential election last November in anticipation of tax cuts and a less stringent regulatory environment before slumping about two months later.

“It’s a very uncertain time,” said Martha Gimbel, executive director of the Budget Lab at Yale University. “It’s just hard for people to make decisions right now.”

Nonfarm payrolls likely increased by 110,000 jobs last month after rising by 139,000 in May, a Reuters survey of economists showed. That reading would be below the three-month average gain of 135,000. Estimates ranged from a rise of 50,000 to 160,000 jobs. Average hourly earnings are forecast to jump 0.3% after advancing 0.4% in May. That change would keep the annual increase in wages at 3.9%.

Economists estimate the economy needs to create between 100,000 and 170,000 jobs per month to keep up with growth in the working-age population. They will be watching for revisions to the April and May data. Revisions this year have been skewed to the downside. Some economists speculated that small businesses were filing late responses to the establishment survey, from which the nonfarm payrolls are derived.

“Whatever the cause of the revisions, the established pattern means it makes sense to subtract about 30,000 from the first estimate of June payrolls and to focus on the trend rather than one month’s numbers,” said Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics.

Much of the slowdown in job growth reflects tepid hiring. Layoffs remain fairly low, with employers generally hoarding workers following difficulties finding labor during and after the COVID-19 pandemic.

 

RISING LAYOFFS

But layoffs are picking up and the lackluster hiring means fewer opportunities for those who lose their jobs, accounting for the anticipated uptick in the unemployment rate.

A survey from the Conference Board last week showed the share of consumers who viewed jobs as being “plentiful” dropped to the lowest level in more than four years in June.

The expected rise in the jobless rate last month to the highest level since October 2021 would follow three straight months in which it held steady at 4.2%. Most economists expect the unemployment rate will continue rising through the second half of this year, and potentially encourage the Fed to resume its policy easing cycle in September.

The Fed last month left its benchmark overnight interest rate in the 4.25%-4.50% range, where it has been since December. Fed Chair Jerome Powell on Tuesday reiterated the central bank’s plans to “wait and learn more” about the impact of tariffs on inflation before lowering rates again.

“We are starting to see some important shifts that perhaps paint a worse light on the jobs market than most people have been thinking,” said James Knightley, chief international economist at ING. “I don’t think June’s report is going to be weak enough to make the case for a July rate cut, but the risk is that the Fed is starting to think … perhaps we need to put a bit more emphasis on where the jobs numbers are heading now.”

Some economists, however, see limited scope for the unemployment rate to rise as the immigration crackdown shrinks the labor pool. With the White House having revoked the temporary legal status of hundreds of thousands of migrants, economists said fewer than 100,000 additional jobs per month would likely be needed to keep the jobless rate stable.

The healthcare sector likely continued to dominate the job gains last month. But leisure and hospitality employment could have been curbed by some migrants staying home in fear of being rounded up for deportation. Similar concerns could also have affected construction payrolls, while tariffs probably continued to weigh on manufacturing employment.

Moderate federal government job losses likely persisted. The administration’s unprecedented campaign to drastically shrink the federal workforce has been tangled in legal fights.

“The mass of federal layoffs, the voluntary retirements and any reductions in force probably do not slow payrolls until October,” said Michael Gapen, chief U.S. economist at Morgan Stanley. “Also, there has been little evidence yet of slower federal government hiring.” – Reuters

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