U.S. Lost 23,000 Jobs in July, Far Shy of Forecasts for a Gain of 80,000
Key Takeaways
- •The U.S. economy lost 23,000 nonfarm payroll jobs in July, sharply missing consensus expectations for an 80,000-job gain.
- •Revisions to June and May payroll figures removed a combined 103,000 jobs from previously reported totals, continuing a pattern of downward corrections.
- •The unemployment rate ticked down to 4.1%, while average hourly earnings rose just 0.1% for the month and 3.2% year-over-year, both below forecasts.
- •Market-implied odds of a Federal Reserve rate hike in September declined from 55% to 46% following the report's release.
- •RSM chief economist Joe Brusuelas attributed the labor market weakness to a seasonal adjustment distortion tied to World Cup timing and urged focus on the upcoming July CPI data.
July Jobs Report Shows Unexpected Contraction
The U.S. labor market weakened for the second consecutive month in July, with the economy shedding 23,000 jobs, according to the government's Nonfarm Payrolls Report released Friday morning. The figure fell far short of the consensus expectation of an 80,000-job gain and represented a decline from June's revised addition of 20,000 jobs.
June's payroll numbers were revised down sharply from an originally reported 57,000 gain to just 20,000. May's figures were also cut significantly, lowered to 63,000 from a previously reported 129,000. Together, the revisions erased roughly 103,000 jobs from earlier totals, continuing a pattern of downward corrections that has characterized much of the past year's reporting.
The last negative jobs print came in February, when the U.S. lost 156,000 positions.
The unemployment rate edged down to 4.1%, compared with both the expected 4.2% and June's 4.2% reading. The unemployment rate is derived from a separate household survey, which measures employment status differently and can diverge from the payroll data drawn from the establishment survey of businesses.
Wage Growth Also Disappoints
Average hourly earnings rose just 0.1% in July, missing forecasts of 0.3% and decelerating from June's 0.3% pace. On a year-over-year basis, earnings increased 3.2%, below the 3.5% expected and down from 3.4% in June. The annual pace has been gradually cooling from the roughly 4–5% levels seen during 2023.
Market Reaction
Financial markets responded swiftly to the report. U.S. stock index futures moved higher and interest rates dipped. Precious metals rallied, with gold gaining 3% on the day and silver rising nearly 6%. Cryptocurrency markets showed little reaction, with bitcoin holding modestly higher on the session at $65,000.
Fed Rate Hike Odds Decline
Ahead of the report, markets were divided on whether the Federal Reserve would raise rates at its September policy meeting. According to CME FedWatch, interest rate traders had been pricing in a 55% probability that the central bank would tighten next month. Following the jobs print, that figure slipped to 46%, placing the likelihood of a September hike below 50%.
The weak labor market data could give the Federal Reserve room to hold rates steady despite elevated inflation. The next major data point for policymakers and markets will be the July Consumer Price Index report, scheduled for release the following week.
Contrarian View: World Cup Distortion
Joe Brusuelas, chief economist at RSM, offered a contrarian perspective, arguing that the Fed should and likely will largely disregard the July report. He attributed much of the weakness to a seasonal adjustment distortion tied to the timing of the World Cup.
Source: CoinDesk
