US Nonfarm Payrolls Report – July

US nonfarm payrolls rose by only 73,000 in July, the weakest increase since October 2023.

The unemployment rate rose to 4.2 percent. Employment growth in the last three months has been limited to an average of only 35,000 jobs. The labor force participation rate also declined for the second consecutive month. Employment data based on the household survey indicated a contraction in July.

Experts suggest this data points to the weakest employment growth since the beginning of the COVID-19 pandemic. The rising unemployment rate, particularly despite declining labor force participation, underscores the weakening labor market.

Average hourly earnings increased by 0.3 percent month-over-month, aligning with expectations, while the 3.9 percent annual increase exceeded inflation, indicating a real increase in workers’ purchasing power.

Commentary on the economy is divided. Optimists believe inflation remains under control with recovering consumer confidence, though tariffs partially affect prices. Pessimists argue that spending is down, especially among young people, economic growth increasingly depends on the wealthy, and price sensitivity is rising.

“Almost all major indicators have been quite stable since last fall,” said Guy Berger, a senior researcher at the Burning Glass Institute, indicating a cautious balance in the economy. However, he cautions that this stability may not endure due to factors such as trade tariffs, immigration restrictions, and new tax regulations.

The release of nonfarm payrolls data caused a sharp repricing in the US bond market. Although expectations for a rate cut had weakened after hawkish comments from Fed Chair Jerome Powell, they regained strength following weak employment data. A 114 basis point rate cut over the next 12 months has started to be priced in, raising the probability of a September rate cut to 64%.

Markets reacted swiftly to the data: Spot gold rose $38 per ounce in 15 minutes, reaching $3,340. The US dollar index, DXY, fell more than 100 points to 99.11.

This is not investment advice.