Labor Market Data Sends Mixed Signals Amid Immigration Shifts

The latest jobs report paints a deceptively strong picture of the U.S. labor market. Non-farm payrolls surged to 147k—far exceeding the 100k consensus—while unemployment unexpectedly dipped to 4.1%. These figures likely eliminate any chance of a July Fed rate cut, contradicting the FOMC's June projections.

Beneath the surface, plummeting immigration since the TRUMP administration took office is artificially bolstering labor metrics. Reduced border crossings have shrunk the workforce, creating mechanical strength in unemployment data. This mirrors last year's inverse dynamic under Biden, where immigration inflows temporarily inflated unemployment figures.

Such distortions previously triggered premature Fed action, including last September's 50bps cut following a false Sahm Rule signal. The current data suggests policymakers must look beyond headline numbers to discern true labor market health.