JPMorgan: June Non-Farm Payrolls Are a "Reality Check" for the Real Economy
0xBroomberg
June nonfarm payrolls added just 57,000 jobs — half the expected figure — and JPMorgan strategist David Kelly says the real economy is running at 'turtle speed,' exposing a widening rift between tech euphoria and everything else.
How bad was this jobs report, exactly?
June payrolls: 57,000 added vs. 114,000 expected and May's revised 129,000 — the actual number came in at half the forecast.
Unemployment dipped to 4.2%, but labor-force participation slid to 61.5%. This means → the jobless rate fell not because more people found work, but because more people stopped looking.
Average hourly earnings held at 0.3% month-on-month; real wages have now declined for three straight months. The Atlanta Fed's Q2 GDP tracker sits just above 1%.
Why can Wall Street party while the real economy stalls?
Kelly flags a "huge divergence" between AI-and-tech enthusiasm and broad weakness across other sectors.
In plain terms = the stock market rally is being carried by a handful of tech giants, while most industries are hiring less and growing slower.
His warning: if tech momentum fades, "we may find ourselves in a much more serious problem."
Can consumers and the government keep spending?
Kelly says lower- and middle-income consumers are "really not doing well — they're struggling" — wages flat, prices sticky, purchasing power squeezed from both sides.
The federal deficit is projected to exceed $2 trillion this year; last month alone the government paid out roughly $50 billion in tariff refunds.
This means → fiscal room to stimulate the economy is shrinking fast.
What will the Fed do next?
Kelly estimates the FOMC vote split at roughly eight-to-four in favor of holding rates steady — a hike is essentially off the table.
His reasoning: "This is not an inflation-generating economy" — if wages don't respond, the wage-price spiral never ignites.
In plain terms = the economy is too weak to justify a hike, but not weak enough to force an immediate cut.
When will inflation actually come down?
Kelly expects CPI to retreat from its May peak of 4.2% to about 3% by December, potentially falling below 2% by next May.
The key driver is housing: rising vacancy rates + slowing rent growth. Rent accounts for roughly one-third of the CPI calculation — once that component eases, headline inflation follows.
This reflects a broader point: the "last mile" on inflation won't be won by monetary-policy pressure alone — it hinges on the rental market cooling on its own.
Inflation in America is like Teflon — it doesn't stick, because if wages don't respond, you don't get a wage-price spiral.
David Kelly
Chief Global Strategist, JPMorgan Asset Management
(CNBC interview)
Content is for reference only, not financial advice.