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Marc Chandler – US Jobs Report, Q2 GDP, FED Policy, MCA Trade Agreement, Interest Rates, Currencies

The KE Report Jul 3, 2026

Summary

June US payrolls rose just 57,000 against a 113,000 forecast and prior months were revised down 74,000, pointing to a low-hiring, low-firing labor market.

The guest cautions the drop in unemployment to 4.2% reflects fewer people participating in the labor force, not renewed economic strength.

The guest rejects stagflation calls: Q2 growth near 1.2% sits below the Fed's roughly 1.7% trend, and supply shocks rather than demand keep inflation elevated.

USMCA stays in force but shifts to annual reviews for a decade, with Washington pushing higher US domestic content and both partners rejecting bilateral deals.

With about one Fed hike priced for 2026 and the yen at 40-year lows, the guest sees the dollar's rally possibly peaking.

Kevin Warsh's takeaways

  • Top takeaway The guest notes the Fed under Chair Kevin Warsh delivered a hawkish hold: the dot plot from Warsh's first meeting showed nine of 18 officials favoring at least one 2026 hike, with about two-thirds of dots pointing to two, and the market now fully prices one hike with roughly 20% odds of a second.
  • Asked whether monetary policy is restrictive, Warsh argued it is tight for the housing market but maybe not tight for capital markets.
  • At the ECB forum in Sintra, Warsh said inflation expectations have eased in recent weeks — a claim the guest finds hard to support beyond lower oil and gasoline prices.
  • The guest notes Warsh is not a fan of forward guidance.
  • Warsh has set up a task force to decide which data matter for policy and how to improve the timeliness of collection, in response to recurring payroll revisions.

Marc Chandler's takeaways

  • Top takeaway Argues the interest-rate adjustment is probably over or nearly over: as of the July 2, 2026 recording, December fed funds futures price about 30 basis points of tightening this year — one hike fully priced, roughly 20% odds of a second — which he considers prudent given weak jobs data and falling oil.
  • Rejects the stagflation label: Q2 2026 growth tracking near 1.2% still runs above the Fed's roughly 1.6-1.7% trend estimate, and inflation is elevated mainly because of the Iran-war and tariff supply shocks — without them he says inflation would be near the 2% target.
  • Suggests the dollar index may have peaked in late June around 101.80, and a break below its 20-day moving average could open a further decline of about 10% as the market reins in its hawkish-Fed bullishness.
  • Reads June's 57,000 jobs (vs 113,000 expected, prior two months revised down 74,000) as a low-hiring, low-firing labor market: the fall in unemployment to 4.2% came only from participation dropping to 61.5%, while first-half 2026 job growth averaged about 97,000 a month versus 27,000 a year earlier.
  • On trade, he says the USMCA stays in effect but, after the administration declined to renew it by the July 1 deadline, moves to annual reviews for up to a decade (it lapses in mid-2036 without renewal); he expects the US to push for higher domestic content and warns many US states would suffer if the pact were dissolved.

Shad Markwitz's takeaways

  • Top takeaway The host presses that payroll revisions are chronic across administrations and that markets react to headline prints without revisiting the later revisions.
  • He suggests recurring supply shocks — COVID, Ukraine, Iran, tariffs — may be a 'new normal' that keeps inflation above growth, and flags fertilizer and pesticide shortages combined with El Nino heat as a grocery-store food-price risk in late Q3 and early Q4 2026.