Our weekly podcast by Kevin Lings:

While the US economy adds jobs, SA continues to shed jobs

In this podcast, STANLIB’s Chief Economist, Kevin Lings, analyses the latest US and South African employment data. The US added 57000 non-farm jobs in June, which will enable the economy to keep growing steadily. In Q1 2026, SA shed about 80000 jobs. While this was partly seasonal, over the past 2.5 years, SA has shed 431000 formal sector jobs, highlighting the need for more fixed investment spending.

The focus areas during the week included:

• The S&P 500 gained 1.8% in the holiday-shortened week the Nasdaq Composite gained 2.1%. In contrast, Russell 2000 lost 0.5% of its value. In general, US equity markets weakened on Wednesday and Thursday, although they had a mixed response to the weaker-than-expected employment data. (US markets were closed on Friday, 4 July due to the Independence Day holiday.) In June, the S&P 500 lost 1.1% of its value but gained an impressive 14.9% in Q2 2026 – its best quarterly performance since 2020. Year-to-date the S&P 500 is up 9.3%. Solid economic growth, paired with the AI investment boom and rising profitability, has been good for US equities in the current phase of the business cycle.
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• The STOXX Europe 600 Index finished up an impressive 2.6%, helped by the lower oil price. Japan's stock markets generated solid returns, with the Nikkei 225 Index gaining 0.6% (after being down 0.91% in the first four days of the week) while the broader TOPIX Index added 2.6%. Last week’s divergence in Japanese equity market returns reflects some profit-taking in high-priced technology and semiconductor stocks after a strong AI-led rally. SA’s All-Share Index gained 1.2%, but it is still down 3.7% year-to-date. Most of the last week’s gains were in Resources, which added 3.6%, but are down 11.4% in the year to date.‍
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• US government bonds generated negative returns. Yields increased across most maturities, although shorter-term yields largely declined on Thursday after the weaker-than-expected US labour market report. After ending the prior week at 4.38%, the yield on the benchmark 10-year US government bond rose to about 4.49% by Thursday afternoon.‍
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• In energy markets, WTI oil is currently around $69/barrel, while Brent oil is about $72/bl. The international oil price has declined meaningfully in response to the de-escalation of the US/Iran war and the systematic improvement in shipping traffic through the Strait of Hormuz. In the final week of June, an average of 17 oil tankers moved through the Strait a day, and an average of 40 ships a day including all vessels. Under normal conditions, an average of around 90 to 100 ships move through the Strait each day.

• The rand has appreciated by 1% against the US dollar in the first three days of July compared with a gain of only 0.2% for the emerging market currency index over the same period. The lower oil price and weaker-than-expected US labour market data have tempered expectations of a steeper US interest rate path, reducing support for the dollar. ‍
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• In June 2026, the US unemployment rate eased to 4.2%, slightly below market expectations for the rate to remain unchanged at 4.3%. The rate of unemployment has remained in a very narrow range of 4.2% to 4.5% in each of the past 12 months. Importantly, the labour market participation rate fell from 61.8% to 61.5%, which is very significant. It helps to explain the lower unemployment rate, even though the economy added only 57 000 jobs in the month. ‍
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• US non-farm employment rose by a modest 57 000 jobs in June 2026, which was well below market expectations for an increase of 113 000 (Bloomberg). The previous two months’ employment data was revised down by a combined 74 000. Over the past four months the US has added an average of 137 000 jobs a month, which is a lot more encouraging than in February 2026, when the six-month average was - 6 000 jobs. At the industry level, health care and social assistance continued to add most of the jobs, but there was a surprise 61 000 decline in leisure and hospitality employment, considering the current Soccer World Cup. Overall, the gain of 57 000 jobs in June is modest but not concerning – especially given the ongoing decline in labour market participation. That means that the breakeven level of employment has fallen significantly in recent years, for a range of reasons, including a sharp decline in immigration and a strong increase in the number of people retiring. Understandably, the latest (past four-months) labour market data will discourage the US Federal Reserve (Fed) from cutting interest rates any time soon, especially since the risk to core inflation is still to the upside. Instead, it allows the Fed to focus more exclusively on bringing the US inflation rate fully under control. Since the report, the probability of a rate hike at the Fed’s July meeting has dropped from around 29% to about 18%, according to the CME Fed Watch tool.‍
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• US job openings rose modestly to 7.594 million in May, above consensus expectations and the highest reading since May 2024. Hiring and quits rates were unchanged from the prior month.
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• On Wednesday, the US ADP report highlighted that the private sector added a lower-than-expected 98 000 jobs in June, down from 122000 in May. The job gains were concentrated in education and health services (48 000), trade, transportation, and utilities (15 000) and financial activities (14 000). Small businesses accounted for over half of the month’s hiring.
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• The US Conference Board’s consumer confidence index was below expectations at 91.2 in June, although it improved slightly from May’s downwardly revised reading of 90.6. The report showed a modest improvement in expectations, but consumers’ assessment of current conditions weakened. The share of respondents saying jobs were “hard to get” rose to the highest level in more than five years.‍
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• The ISM manufacturing index reading for June dropped 0.7 points to 53.3 in June, missing consensus estimates for an index level of 53.9 but registering the sixth consecutive month of expansion. New orders and production slowed but remained in expansion, while the prices paid index fell sharply to 73 from 82.1. The prices paid index remains elevated, highlighting that, while some cost pressures appear to be stabilizing, there is meaningful upside risk to US inflation.
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• In May 2026, SA’s trade balance recorded a surprise deficit of R1.79 billion. This is far below market expectations for a surplus of R12.8 billion and well down from April’s revised trade surplus of R14.4 billion. The May trade deficit largely reflects a 5.7% m/m (R10.8billion) decline in exports, which included a R11.1 billion fall-off in exports of precious metals (because of a sharp pull-back in precious metal prices). At the same time, SA’s imports rose by 3.1% m/m (R5.4 billion) in May, which included a R3.6 billion increase in oil imports, and a R4.1 billion rise in imports of vehicles as well as vehicle parts.
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• According to SA’s Quarterly Employment Statistics (QES), formal sector employment declined by 80 000 jobs in the first quarter of 2026. This compares with an increase of 15 000 jobs in the final quarter of 2025 (SA’s formal sector employment data is not seasonally-adjusted). Over the past year, formal sector employment has declined by 121 000 jobs and has fallen by 431 000 jobs over the past 2.5 years. There is a noticeable difference in the performance of full-time vs part-time formal sector employment. For example, a breakdown of the Q1 2025 q/q job losses of 80 000 employees reveals that 56 000 were part-time employees. The decline of 121 000 formal sector jobs over the past year includes a decline of 73 000 part-time workers. Importantly, some of the fall-off in part-time employment might be attributable to seasonal factors, as the economy moves from the typically busy fourth quarter of the year into a relatively more tepid first quarter – especially since the trade sector and tourism sector accounted for half of the job losses in Q1 2026. Still, the fact that SA has been unable to gain momentum in formal sector employment over the past three years (whether full-time or part-time) is a very significant concern. ‍
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• Consumer inflation in the Eurozone fell to 2.8% in June, helped by the lower fuel price. This was well below the 3.2% recorded in May. The market expected CPI to moderate to 3% y/y. Inflation slowed in some of the region’s biggest economies, including Germany, France, and Italy. Although the headline inflation rate remains above the European Central Bank’s (ECB) 2% target, the latest inflation data could ease the urgency for the ECB to increase interest rates in the short term.
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• According to Eurostat, the unemployment rate in the Eurozone was recorded at 6.2% in May, largely unchanged from April. The youth unemployment rate rose to 14.7%.‍
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• China’s June PMI data showed manufacturing activity back in expansionary territory, suggesting continued resilience despite weakness in parts of the domestic economy. The official manufacturing PMI, which tends to have greater representation of larger companies, rose to 50.3 in June from 50 in May, supported by stronger production and new orders as well as continued strength in high-tech manufacturing. The non-manufacturing PMI, which covers construction and services, edged up to 50.2 from 50.1 in May, above expectations for a modest decline. The private sector Rating Dog manufacturing PMI, which is often viewed as capturing a greater share of smaller and export-oriented firms, eased slightly to 51.7 from 51.8 in May. The data supported China’s uneven-growth narrative. High-tech and downstream manufacturing is performing better than upstream segments and more domestic demand-sensitive areas.‍
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• The People’s Bank of China (PBoC) launched overnight reverse repo operations this week. The central bank offered CNY 300 billion, or about $44 billion, through the new tool on Monday and CNY 600 billion on Tuesday. The initiative appears to be more consistent with a refinement of the monetary policy framework than the start of a broad easing cycle - especially since an increase in liquidity could help to stabilise risk appetite, but it may not (by itself) resolve the domestic-demand weakness.‍
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• The Bank of Japan’s quarterly Tankan survey showed that sentiment among large manufacturers improved for a fifth consecutive quarter. The index rose to 22 in Q2 2026 from 17 in Q1, its highest reading since 2018. The survey pointed to resilient corporate activity, supported by AI-driven semiconductor demand and robust capital expenditure plans, although respondents also highlighted higher energy costs and global trade uncertainty as headwinds.
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