And just like that, the odds of a Fed hike in September diminished meaningfully.
The US economy lost 23,000 jobs on net last month, the BLS said Friday, in a shocker. Consensus expected an 85,000-job gain.
The decline was driven in no small part by a (seasonal) 50,000-job loss in local-government education, but private-sector hiring was weak at just 30,000, consistent with the lackluster ADP headline and well below the 80,000 consensus.
In keeping with recent precedent, the prior two months’ NFP headlines were revised lower, and not by a little bit. May now reflects a mere 63,000-job gain and June’s already-weak hiring pulse is now faint indeed at just 20,000.
Consider this: The three-month average for the NFP headline was 111,000 headed into Friday’s release. Incorporating the negative print for July and the revisions to May and June, that metric is now just 20,000.
Looking at the details, leisure and hospitality shed another 40,000 jobs on top of the 43,000 the sector lost in June (revised from an initially-reported 61,000 decline). Retail lost jobs, so did the financial sector.
Notably, the goods-producing side of the economy added 25,000 jobs against a negligible 5,000-job gain for the private, services-providing sector. That’s consistent with the message from July’s ISM releases, which saw manufacturing put in a better showing than services.
Average hourly earnings undershot meaningfully, posting a meager 0.1% MoM advance. The YoY pace was just 3.2% versus 3.5% expected. Depending on next week’s CPI release, household pay growth likely trailed headline inflation last month, further eroding real purchasing power.
On the household survey side, the jobless rate fell to 4.1% — 4.09% unrounded.
The participation rate slipped again, to 61.4%. Excluding the 12 months following the onset of the pandemic, that’s a new “since 1976” low. The downward drift (plunge?) is suppressing UNR.
The employment level on the household side fell again, this time by 87,000. It’s down — drumroll – 1.82 million since December.
If you’re Donald Trump, I don’t know what you make of this. The election-year optics aren’t great, to put it mildly. This release strongly suggests that some of the supposed “resilience” in the labor market was an optical illusion.
That said, and as alluded to here at the outset, this is all the “proof” Kevin Warsh will need in the course of holding off on a September rate hike. It’d take a succession of scorching-hot inflation prints and a blockbuster August jobs report to get a hike next month. In that context, this release is convenient for Trump headed into the mid-terms.
“There is nothing in this report that suggests a September hike should be on the table [even as] the case for hiking is inflation-based,” BMO’s Ian Lyngen remarked. “When combined with the June payrolls print, July’s NFP report points to underlying downward pressure in the labor market as opposed to simply a one-off, noisy release.”
Note that the two-month revision to the establishment survey headline was the largest since the July 2025 jobs report, which is to say since the release which cost Erika McEntarfer her job.
