Weekly Update 07/02/2026: Supreme Court Upholds Fed Independence
- Palo Alto Networks added to SGK Core
- Payroll growth slows
The Fed
In one of the most eagerly anticipated rulings this term and potentially in many decades as it relates to financial markets, the Supreme Court rejected President Trump’s bid to fire Federal Reserve governor Lisa Cook in a 5-4 vote. In writing the majority opinion, Chief Justice John Roberts said that accepting Trump’s position “would allow the president to remove a member of the Federal Reserve at any time, for any reason, without any notice before, and without any judicial check after.” He and four other justices believed that threatening the central bank’s ability to set policy free from political influence was the very reason why Congress made the Fed independent in the first place. He continued: “Not only the fact of independence but also the appearance of independence is key to the Federal Reserve’s design.” The Federal Reserve controls the cost of money and serves as the de facto banker to the world given the dollar’s hegemony, meaning there was something larger than Cook’s job at stake in this ruling. Roberts, a conservative, was joined in the majority vote by Justice Brett Kavanaugh, a Trump appointee, and the court’s three liberal justices. Four conservatives dissented.
In a social-media post, Bill Pulte, a top housing official and recently elevated to acting director of national intelligence, said the campaign to unseat Cook will continue. Two lower courts blocked Trump from firing her while her lawsuit proceeded. The Supreme Court’s decision maintains that block, but it does not offer indefinite immunity. As the lawsuits in lower courts proceed, she may ultimately be found guilty and thus removed “for cause” based on mortgage fraud. Those cases may take months or years to conclude, potentially surpassing Trump’s time in office. Cook was reappointed to the Board of Governors by then-President Joe Biden, in 2023, and her term does not expire until January 31, 2038. Former Chair Jerome Powell remains on the Board even though his term as leader ended May 15. His term does not end until January 31, 2028.
While the decision is a roadblock for the Trump administration, it will allow current Chair Kevin Warsh the freedom to operate independently just as Congress intended. Chief Justice Roberts specifically referenced the institutional protection the Fed has given its “unique historical status and role.” In a companion ruling on Monday, the court stripped similar removal protections from leaders of other Federal agencies, again emphasizing the exceptional position and power of the Federal Reserve Board in policymaking.
Economic Data
Before the monthly jobs report was released this morning, investors got a labor market reading through the Jobs Openings Labor Turnover Survey (JOLTS) report for May. According to the Bureau of Labor Statistics, available positions rose to 7.59 million, about even with the April level and a little above the median estimate in a Bloomberg survey of economists which called for 7.3 million openings. The construction and leisure industries saw the biggest jump in vacancies while openings in the financial activities sector, fell for the second consecutive month. The number of vacancies per unemployed worker was unchanged at 1 to 1. The so-called quits rate, which measures the percentage of people voluntarily leaving their jobs each month, was also unchanged at 1.9%.
The May report shows a relatively healthier U.S. labor market than many were expecting. While prices have surged since the conflict with Iran began at the end of February and consumer sentiment plunged subsequently, it has had less of an effect on the demand for workers despite some high-profile job-cut announcements from tech highfliers Uber Technologies, Microsoft Corp. and Meta. Speaking of confidence, the Conference Board’s gauge rose 0.6 points to 91.2 in June after a downward revision to the prior month. Nevertheless, that figure still failed to match the median estimate of 94.4 predicted in a Bloomberg survey of economists, and a metric of perceptions about the job market fell to the lowest level in more than five years. Cheaper gas prices are helping reduce some consumer anxiety, but job opportunities remain depressed in what has become a “low hire, low fire” economy emphasized by former Fed Chairman Jerome Powell. Intentions to buy a car, a home or a big-ticket item all rose in June, suggesting either consumers are feeling a wealth effect from record equity market gains or they are deluding themselves given the constrained hiring environment.
This morning, the Labor Department released its monthly nonfarm payroll data which showed job growth rose 57,000 in June after a downward revision to the prior two months. The estimate in a Bloomberg survey of economists called for job growth of 113,000. The revision of both April and May resulted in a decline of 74,000 jobs versus the prior released figures. The unemployment rate fell to 4.2% from 4.3% primarily due to a contraction in the labor force participation rate. The decline was concentrated in the biggest decline in leisure and hospitality payrolls since 2020 and might be why we saw such a big jump in vacancies in that area from the JOLTS report. The retail and information sectors also lost jobs, while healthcare and social assistance reported gains. The AI boom has led to growth in the manufacturing and construction payroll figures. What was concerning, however, was that the participation rate—which measures the share of the population working or looking for work—fell to 61.5%, the lowest level in more than five years and below the 61.8% in the prior reporting period. This could be explained by older generations reaching retirement age or by frustrated job seekers throwing in the towel.
While average monthly growth in payrolls in 2026 has surpassed 2025, the trend has been declining since March. “The jobs data’s been moving in a good direction,” Kevin Warsh said last month at his first news conference as Fed chair, after officials held interest rates steady. Initial jobless claims, a timelier weekly indicator, came in a little below expectations at 215,000 in the week ended June 27, which was even with the week prior. In the comparable week from 2025, the initial claims figure was 231,000. This suggests that while AI-driven restructuring is becoming more visible in the tech economy (accounting for nearly a third of all cuts announced this year according to data from labor expert Challenger, Gray & Christmas), its impact has not spilled over to have a broader labor-market influence. At least not yet. With average hourly earnings increasing at 0.3%, the 3.5% annual pace is barely keeping pace with inflation, putting pressure on the administration ahead of upcoming midterm elections. The Fed’s next scheduled meeting is July 29, which provides another opportunity for the Board to make its mark upon monetary policy if they so choose.
Company Events
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