The data released by the US Bureau of Labor Statistics on Friday (August 7) showed an unexpected decrease of 23,000 nonfarm payrolls in July, with a slight decrease in the unemployment rate and a slowing employment situation. Due to the employment report, the probability of a rate hike by the Fed in September has decreased.
The Labor Statistics Bureau’s employment report indicates that after seasonal adjustments, nonfarm payrolls decreased by 23,000 in July. The Dow Jones had previously expected an increase of 83,000 jobs in July. The unemployment rate for July dropped from 4.2% in June to 4.1%.
In addition to the weak employment data in June and July, the final employment figures for May have also been revised downward by 63,000 compared to the previous estimate of 66,000. The revised data has brought the average employment over the past 12 months down to just 34,000.
The main reasons for the decrease in employment in July were a reduction of 50,000 jobs in the local government education sector, a decrease of 19,000 jobs in the retail industry, and a reduction of 14,000 jobs in the financial sector.
Within the retail industry, employment at warehouse clubs, large supermarkets, and other general merchandise stores decreased by 21,000; employment at gas stations and fuel dealers decreased by 5,000; while employment in sporting goods, hobby, musical instrument, book, and other miscellaneous retail stores added 10,000 jobs.
The healthcare industry continued to see a uptrend in employment. In July, an additional 22,000 jobs were created, but the growth rate was lower than the average of the past 12 months at 36,000 jobs.
In terms of employee wages, the average hourly earnings increased by 2 cents to $37.62 in July. Average hourly earnings saw a year-on-year increase of 3.2%, which is lower than the previous forecast of 3.5%.
At the time of the release of this report, there were diverging views among Federal Reserve policymakers on the direction of interest rates. Despite the improvement in the labor market from the slump in 2025, the inflation rate remains significantly above the Fed’s target of 2%.
Following the release of the employment report, traders adjusted their expectations for when the Fed will raise interest rates. According to the FedWatch futures price index from the Chicago Mercantile Exchange Group, the probability of a rate hike in September has decreased to 44%, and in October to 58.3%.
As the market expects the Fed to take a more dovish stance, stock index futures are rising. Futures linked to the Dow Jones Industrial Average rose nearly 200 points, while US Treasury yields initially remained flat in the early session before plummeting significantly.
(This article was referenced from CNBC’s report.)