Welcome back to KPA Wealth. — Today’s spotlight is on the June jobs report, and while it looks strong on paper, there’s a twist you need to see. We’re breaking down how state and local governments are inflating job numbers, making it nearly impossible for the Fed to justify a rate cut this July. If you’re in real estate, finance, or just watching the markets, this one’s for you.

Also Today:

• Shocking Jobs Report Just Crushed Hopes for a July Rate Cut—Here’s What You Need to Know

• Today’s Mortgage Rates

Shocking Jobs Report Just Crushed Hopes for a July Rate Cut—Here’s What You Need to Know

June’s massive jobs report is in and it’s a major blow to anyone rooting for a Fed rate cut in July. The Bureau of Labor Statistics reported that the U.S. economy added 147,000 jobs, pushing the unemployment rate down to 4.1%, better than the expected 139,000 gain and 4.2% rate. This shouldn’t be welcome news if you’re hoping for a mortgage-friendly move from the Fed. Instead, these numbers pushed the market’s chances of a July rate cut from around 20% down to just 5%. That is a blunt landing for winners of savings, but a gut punch for first-home buyers and refinancing hopefuls.

Adding fuel to this narrative is the uneven pattern behind that headline number. A whopping 47,000 of those jobs are from state government, and another 39,000 from health care. Those are stable, taxpayer-backed roles—great for public employees, but not the private-sector spark that usually drives broader economic expansion. And yes, private payrolls actually hit a snag in June under the ADP report, contracting by 33,000 jobs, marking the first such drop since March 2023. So here we are with a split personality: government jobs booming, private-sector hiring stalled.

State Hiring Is Holding Up the Fed

Here’s a bold takeaway: the Fed might be effectively hamstrung by state and local governments who keep hiring aggressively. That public-sector hiring surge is artificially inflating total job gains, making the labor market appear hotter than it's playing out in actual private employment. Jerome Powell and the Fed are keenly watching inflation and labor demand. With so many state-backed jobs, a policy pivot becomes politically and economically tougher. Essentially, local payroll decisions are limiting the Fed’s options, even if private-sector growth is weak.

That concern’s real. Fed Chair Powell pointed out in a recent statement that trade tensions and tariffs have already hindered rate cuts, and now strong headline job gains pile on more heat. The stubborn uptick in inflation tied to Trump-era tariffs, plus unexpected job growth numbers, collectively tie Powell’s hands. And trust me, I’ve been watching this play out—state hiring includes stimulus-backed education and healthcare roles, not organic private-sector growth. If you’re a realtor or small business, you’re probably shaking your head: artificial job growth shouldn’t dictate rate policy, but here we are.

My Two Cents on What This Means for You

If you’re house hunting, refinancing, or simply paying off debt, this isn’t encouraging. Mortgage rates generally follow Fed moves: no cut means “reset” now means higher monthly payments later. You might want to lock in your rate before the next Fed meeting in July. If you're a business owner, you may struggle to hire privately-skilled staff, not because demand isn’t there, but because local governments are scooping talent into steady, state-backed roles.

Another nuance that jumps out: health care and government behemoths are hiring, but other sectors, especially construction and private services, remain stagnant. That’s what ADP noted: a private-sector hiring freeze. If consumer-facing industries aren’t expanding payrolls, economic growth is unbalanced and fragile. Contrast that with quotes from Goldman Sachs’ president John Waldron, who called the recovery “stronger than one might have guessed,” despite Trump’s tariff policy. I agree—but I’d argue that this strength is fragile and lopsided.

What to Watch in July

1. Fed Commentary: Powell will need to carefully parse real broad-based growth (private sector) vs. public-sector hiring. I’ll be eyeing signals around real inflation trends and labor metrics beyond the 147,000 headline. Honestly they should just ignore the state led job gains.

2. Private Sector Payrolls: June’s ADP underperformance might just be the beginning. If July shows a rebound, that indicates real economic resilience, not just government jobs.

3. Tariff Talks: With recent trade deals (Vietnam, UK, China) still unfolding, inflation tied to global supply chains could ease—lighting the path for stable Fed action down the road.

4. Housing Market Reaction: Potential homebuyers and refinancers are watching mortgage rates closely. A dip in July might not happen, but wage growth and inflation data could tip the balance.

Final Thoughts

June’s jobs data is a double-edged sword: headline gains paint a rosy picture, but get past the numbers and it’s clear government hiring is the engine, not private-sector health. That imbalance is the “why” behind the Fed’s reluctance to cut rates now. If you’ve been holding out for better borrowing terms or refinancing, you might want to consider acting now—lock in a deal before the next rate decision.

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Kyle Allgair
CEO of KPA Wealth
📞 (279) 977-8149 | ✉️ [email protected]
🌐 KPAhomeloans.com

Kyle Allgair is the CEO of KPA Wealth, and is continuously helping clients build wealth through real estate and strategic financial planning. Contact him for personalized advice on achieving your financial goals.