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Why Trump is in a mind-blowing sweet spot after the June jobs report

Brian Sozzi
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President Donald Trump has every reason to kick back with a Big Mac and some Cristal this July 4th holiday weekend and toast the economic sweet spot he finds himself in right now.

The president’s ongoing trade war with China hasn’t hammered the U.S. labor market (see the out of the blue strong June jobs report). Stock prices are hovering near record highs. And Wall Street still expects the Federal Reserve to cut interest rates at its next meeting (despite that strong jobs report) to juice the economy after a first quarter soft patch.

Can it get any better at the moment for the Commander-in-Chief (and any worse for the Democrats trying to unseat him)? Probably not.

A stellar jobs report

The U.S. economy added 224,000 non-farm payrolls during June, according to the U.S. Bureau of Labor Statistics. Consensus estimates were for 160,000 positions added during the month, according to economists surveyed by Bloomberg.

The unemployment rate ticked up to 3.7%. Economists were anticipating that the unemployment rate would hold steady at 3.6%, near five-decade lows. Meanwhile, average-hourly earnings rose 0.2% from May and 3.1% year-over-year.

Sectors with the most notable job gains in June included the professional and business services, health care and transportation and warehousing sectors. Manufacturing employment surged in June, with 17,000 positions created despite trade war-related new order weakness in various manufacturing surveys. Economists were predicting 3,000 jobs added in the sector.

Big month for job creation in June.
Big month for job creation in June.

Mr. Market reacted rather negatively on Friday to the red-hot June jobs report as it put the prospect of a 50-basis point interest rate cut — as many expected —at the Fed’s July 30-31 meeting on the back-burner. Investors pared bets on strong recent performers such as Apple (AAPL) and Amazon (AMZN) and rotated into more defense names like UnitedHealth (UNH) and Walgreens Boots Alliance (WBA).

Even still, there was a lot to like in the employment report — above all else it showed the U.S. trade war with China isn’t crippling the U.S. labor market. That should give investors hope that the second quarter earnings season will not be a total disaster, as results from logistics giant FedEx (FDX) suggested two weeks ago.

Moreover, there continues to be a strong possibility of what Wall Street calls an ‘insurance rate cut’ at the upcoming FOMC meeting. That is a 25-basis point rate cut by the Jerome Powell-led Fed as a means to protect the U.S. economy from slowing down too much.

A rate cut of any kind amid a re-acceleration in the labor market and a 3.7% unemployment rate? Can you say Trump economic sweet-spot?

“This report is very positive. I am happy the economy is pulling on all cylinders, but at the same time a lot of people will be worrying if that insurance rate cut from the Federal Reserve is not coming. I don’t think it’s off the table,” former JPMorgan Chase Chief Economist Anthony Chan said on Yahoo Finance’s The First Trade.

‘Good news for Trump’

“This is not totally a goldilocks jobs number, but it’s not bad either,” Chan added.

“This is just good news for Trump,” Yahoo Finance’s senior columnist Rick Newman said.

Get ready for a weekend of bullish economic tweets from Trump — he will be right to do a happy dance off this jobs number.

And don’t be surprised if those investors upset Friday over a strong jobs number return on Monday to buy the dip. After a weekend of partying, they are very likely to realize the Trump economic sweet spot could put more money in their pocket.

Heidi Chung contributed to this story.

Brian Sozzi is an editor-at-large and co-host of ‘The First Trade’ at Yahoo Finance. Follow Brian Sozzi him on Twitter @BrianSozzi

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