Summer Calendar: Tariff Deadlines, Debt Ceiling, Budget Drama, and Jobs Market Fed Meetings
Markets thrive on predictability and certainty. This summer, investors face uncertainty, with clarity not expected until August.
The data: Last week’s release of the May PCE report indicated a 2.1% annual inflation rate (core was at 2.6%). Note that this is very close to the Fed’s 2% target. However, with the tariff uncertainty yet to play out, policymakers will be waiting for more sustained “good” data. This week’s PMI survey (Purchase Managers Index) encapsulates the uncertainty: the report noted a record increase in “inputs”—i.e. advance orders—as companies tried to “front run” potential tariffs by over-purchasing. The survey responses indicated concern and uncertainty regarding trade policy going forward. Also noted were supplier delivery delays and raw material “pre-emptive” inflation, as some suppliers passed on actual or anticipated cost increases.
Optimism/Hope: “Manufacturers are hopeful of a more stable trading environment…with growing expectations that disruption to markets caused by tariffs will dissipate in the months ahead.” Today’s ADP Report: Job creation slowed to a near standstill in May. ADP reported an increase of 37,000 jobs in payrolls for the month—well below the forecast of 110,000 and down from April’s 60,000. That’s the lowest level in over two years. The jobs market has been a steady engine of growth since the COVID recovery began in late 2020. Friday’s release of the May jobs report will be closely watched and parsed. The 10-year Treasury dropped to 4.37% today, down from a 2025 high of 4.60% two weeks ago. Coming Tomorrow: Jobless claims and productivity releases.
Uncertainty: As tariffs (or new agreements) play out in the coming months, the big questions for interest rates are:
- Will increased tariffs costs result in consumer inflation?
- Will they exacerbate possible weakness in the jobs market?
- Will retailers “eat the tariffs,” or increase prices?
- Will higher prices or other disruptive effects slow down the economy and threaten the jobs market?
- Will supply chain issues escalate and if so, persist? How bad might they get, and for how long?
- And how should the Fed respond, if at all?
Fed Governor Goolsbee remarked this week that higher inflation from U.S. import tariffs could become evident quickly, but a tariff-induced economic slowdown would likely take longer to appear—referencing the Fed’s “dual mandate.” Goolsbee: “Once the dust clears on tariff policy, if the economy looks like it did before…April 2, rates can go a fair bit below where they are today.” Fed Governor Lisa Cook yesterday: “But heightened uncertainty poses risks to both price stability and unemployment.”
Upcoming Dates:
- June 6 (Friday): May Jobs report
- June 18: Fed Meeting (Fed commentary: wait and see, Futures: 97% pause)
- July 3: June Jobs report
- July 4: “Deadline” for Congress to pass final budget.
- July 8: End of 90-day US tariff pause on most countries.
- July 30: Fed Meeting (Futures: 75% pause)
- August 8: End of 90-day US China tariff pause.
- August 21-23: Central Banki symposium Jackson Hole
- September 5: August Jobs report
- September 17: Fed Meeting (Futures: 70% CUT)
The next few months of economic reports may be “distorted” as market participant behavior could be affected by unusual market conditions. Normalcy may be elusive. Stay tuned…
By David R. Pascale, Jr., Senior Vice President at George Smith Partners.
