Softer US June Jobs Report and Decline in May Factory Orders Reshape Market Expectations

The US labor market softened in June, with payrolls increasing by only 57,000, falling short of the 113,000 forecast. Revisions also lowered April-May gains by 74,000. The unemployment rate decreased to 4.2%, primarily due to a significant drop in the labor force. This weaker-than-expected jobs data led to a rally in US short-dated treasuries and a sell-off in the US dollar, as markets adjusted expectations for future Federal Reserve rate hikes. Additionally, US factory orders fell by 1.3% in May, a smaller decline than anticipated, mainly driven by weaker demand for transport equipment and aircraft. Excluding transportation, orders saw a solid 1.9% increase.