On June 4, 2025, weak U.S. economic data collided with an intensifying political battle over the Federal Reserve. The ISM Services PMI showed activity in the vast U.S. services sector had contracted for the first time in nearly a year, while a separate report showed private payroll growth had nearly ground to a halt. President Trump used the moment to renew his public attacks on Fed Chair Jerome Powell, calling him "Too Late" and demanding an immediate, sizable cut to interest rates.
Services Sector Slips Into Contraction
The ISM Services PMI registered 49.9% in May, down 1.7 percentage points from April's 51.6% and below the 50-point threshold that separates expansion from contraction, according to the Institute for Supply Management. It was only the fourth sub-50 reading in five years and the first outright contraction since June 2024. The survey's Prices Index jumped to its highest level since November 2022, with respondents citing tariff-driven cost increases across supply chains. One panelist noted that customers were "worried about high increases in tariffs," which had prompted a rush to place orders ahead of anticipated duties. It marked only the fourth sub-50 reading for the services gauge in five years, a rare signal for a sector that makes up the bulk of U.S. economic output.
A Weak Jobs Signal Adds to the Pressure
The same day, payroll processor ADP reported that private employers added just 37,000 jobs in May, well below the roughly 110,000 economists expected and down sharply from 60,000 in April, the weakest reading since March 2023. The slowdown left private payroll growth running well below the pace needed to keep pace with labor force growth, adding to worries that hiring momentum was fading faster than the Fed had anticipated. Coming alongside the soft services data, the figures pointed to an economy losing momentum as businesses absorbed higher import costs and grappled with uncertainty over the Trump administration's trade policy, which by then had layered tariffs across a wide range of goods and trading partners, from steel to consumer electronics.
Trump Renews His Attack on Powell
President Trump seized on the weak ADP figure to intensify his public campaign against the Fed chair, posting that Powell was "Too Late" and must lower interest rates immediately. The comments extended months of pressure in which Trump argued the central bank had fallen behind the curve on rate cuts and suggested the Fed's board should act if Powell would not, part of a broader effort that would, in the following months, include open discussion about who might eventually succeed him as chair.
What It Means for Traders
The combination of softening data and an increasingly public dispute over Fed leadership adds a layer of political risk on top of ordinary economic uncertainty. Weak services and employment data typically raise the odds of rate cuts, which tends to weigh on the dollar and support risk assets, but a central bank perceived as under political pressure can also unsettle bond markets and currency traders wary of eroding institutional independence. Watching both the economic data calendar and the tone of political commentary around the Fed has become essential for positioning in rate-sensitive markets.
Daily market analysis by BCM Markets.