U.S. Job Growth Stalls in July, Raising Odds of Fed Rate Cut
Job creation in the U.S. slowed dramatically in July, and downward revisions to previous months added to signs that the labor market is cooling more rapidly than expected — potentially paving the way for Federal Reserve rate cuts in the near future.
Nonfarm payrolls rose by just 73,000 last month, far below economists’ forecasts of 110,000, according to Friday’s report from the Bureau of Labor Statistics. Compounding the disappointment, June’s gain was revised down sharply from 147,000 to just 14,000, and May’s figure was slashed from 144,000 to a meager 19,000.
That puts average job growth at just 35,000 per month over the past three months — the weakest pace since the early pandemic in 2020.
The unemployment rate ticked up to 4.2%, slightly higher than June’s 4.1%, and matching consensus expectations.
Despite the weak data, Bitcoin (BTC) rose modestly to $115,800, while the 10-year Treasury yield dropped 10 basis points to 4.30%. The U.S. dollar weakened nearly 1% against both the euro and yen, reflecting growing bets that the Federal Reserve could cut rates sooner than anticipated.
The Fed kept its key rate steady at 4.25%-4.50% earlier this week, with Chair Jerome Powell delivering a hawkish tone during the post-meeting press conference. However, the sharply weaker jobs data may weaken that stance.
Market expectations for a September rate cut jumped back to 55%, up from 40% earlier this week, per CME FedWatch data — though still below the 75% level seen just a month ago.
Political and internal pressure on the Fed is also mounting. President Trump has continued to call for rate cuts, and two Fed governors, Michelle Bowman and Chris Waller, voted in favor of easing this week.
With the labor market losing momentum and inflation cooling, the data may tip the scales further in favor of monetary policy easing as early as September.
