Fed Watch – 7/10/2026

The below transcript is a literal translation of the podcast audio that has been machine generated by Adobe Podcast.

Well, the Supreme Court issued a yellow card to the Trump administration in the Lisa Cooke case, and we have our June jobs numbers. After a holiday week off, welcome back. This is ITR Economics Fed Watch. I’m Lauren Saidel- Baker. Let’s jump right into the good stuff this week.

We did last week get an early jobs Thursday with the June payrolls numbers, headline came in at 57,000. That brought the unemployment rate roughly flat, roughly unchanged, 4.2%. Now, both of these numbers were taken in the headlines as something of a miss or something of a lackluster result. But if we really delve into the underlying trends happening in the labor market, I’m personally not convinced that this was as big of a miss as the headlines are making things out to be. First of all, we go down to the individual components. While there were still the same types of strength that we’ve seen in recent months in things like social assistance, things like healthcare, those non macro factors that just aren’t churning growth in the macro economy. We also saw a pretty strong result from professional and business services. So we’re taking that as some good news. Offsetting it somewhat however is losses on net in leisure and hospitality, which again are some of those more fundamental drivers that we would like to see a stronger result from on a component basis. But absent just this one month in June, we can look at the labor market on a more holistic picture. Now we do that here at ITR Economics, starting with some seasonal basis. June did close out the second quarter of the year.

And if we look at both the May to June rise as well as the first quarter to full second quarter rise in something like US Private Sector Employment, we saw that these trends were very normal relative to recent years. We can also take some of our checking points. If you need a refresher on our methodology, please head over to our website and we have a full outline there, we’ll link it in the show notes today. But this analysis of the relationship between quarterly growth rates and annual growth rates, our checking point does show that phase B, or accelerating growth as we call it, is imminent for Private Sector Employment. We’ve been talking a lot on this show about how all of the pessimism, the uncertainty that was something of a holdover from last year, was probably going to strain employment outcomes in the first half of 2026. So now, as we are rounding that corner into the second half, the good news is we’re right on track for improvement, as we have been expecting. And those internal indicators within the data set itself are really being supportive of that thesis. Additionally, we saw Private Job Openings above their year ago level both in April and in May. We don’t quite have the June numbers for that yet. We also saw the June jobs data really in line with our forecast for total employment. So from an ITR perspective, nothing to worry about from the consumer side of things with that labor market. Really no strain here, as much as some sources might want some signs of weakness that would pretend lower interest rates.

But let’s turn to the other major headline that was out last week, and that was the Supreme Court’s decision in the Lisa Cook case. Now, if you remember, we’ve been talking about this quite frequently. This is a question of essentially, does Trump have the authority to fire members of the Federal Reserve? The Supreme Court said no. It was a close decision, a five to four decision that Trump does not have and did not have the authority to fire Lisa Cook, at least yet. And there’s a giant asterisk with this decision. Essentially, the Supreme Court did come out in support of prior rulings that said members of the Fed can only be fired for cause, and that could still happen over these alleged mortgage irregularities. What the decision did decide, though, is they rejected Trump’s bid to pause a lower court ruling that would have prevented her from being fired. So the problem essentially, isn’t that he was looking to fire her over these mortgage issues, which were again deemed for cause in the Trump administration’s telling. The problem was really with the process, the Supreme Court said, or at least five members.

The majority opinion said that cook needed to be given due process, an explanation of the evidence against her and an opportunity to respond. That didn’t happen in their understanding of this case. I think it’s also interesting to note some of the dissents, Alito and Gorsuch, really, they came out with a dissent saying the court shouldn’t have even taken the case at this point. They said it was too nascent of a level of this lawsuit proceeding. It was Clarence Thomas that came out and dissented that the decision was actually an incursion on the powers of the executive branch. So a little bit more underlying tension between these groups, these divisions of power. But I want to end today with a quote from Chief Justice Roberts, who wrote that majority opinion. And I think this is really pertinent to the phase that we are approaching with decisions like this and with the Fed as a whole, looking for that credibility and that independence. He wrote, “Not only the fact of independence, but also the appearance of independence is key to the Federal Reserve’s design.” So in this case, at least in this decision we saw last week, the Supreme Court did in fact, come out for the independence of the Federal Reserve. Expect to hear a lot more on this topic in future months. That’s all for this week on ITR Economics Fed Watch. We’ll be following those trends throughout the summer for you. We hope you’ll join us again next week.