U.S. Added Just 73K Jobs in July, Unemployment Rate Rose to 4.2%

The U.S. jobs market experienced a significant slowdown in July, adding only 73,000 nonfarm payroll positions. This figure, while slightly higher than June’s revised 14,000 (down from an initial 147,000), falls considerably short of economist predictions of 110,000. Further weakening the picture, May’s job growth was revised down to a mere 19,000 from the initially reported 144,000. This translates to an average monthly job growth of approximately 35,000 for the May-July period—the weakest pace since the onset of the COVID-19 pandemic in 2020.

The unemployment rate edged up to 4.2%, aligning with expectations but representing an increase from June’s 4.1%. This sluggish job growth significantly alters the economic landscape and casts doubt on the Federal Reserve’s recent stance.

The subdued hiring figures have triggered immediate market reactions. Bitcoin, initially experiencing sharp overnight losses, saw a modest rise to $115,800 following the report’s release. However, the bond market and the dollar displayed more pronounced responses. The 10-year Treasury yield dropped 10 basis points to 4.30%, while the dollar weakened by almost 1% against both the euro and the yen.

This data directly contradicts the hawkish message delivered by Federal Reserve Chairman Jerome Powell earlier this week, who indicated a reluctance to lower interest rates. Prior to the jobs report, expectations for a rate cut at the September meeting stood at approximately 75%, reflecting a growing consensus among economists. However, Powell’s stance, coupled with the weak jobs report, has diminished the likelihood of a rate cut, although the probability has since rebounded to 55% following the data release.

The weak job growth numbers likely undermine Powell’s position, particularly given the ongoing pressure from President Trump for lower interest rates, and the dissenting votes of Fed governors Chris Waller and Michelle Bowman, who earlier favored a rate reduction. The significantly weaker-than-expected jobs report adds considerable weight to the arguments for a more accommodative monetary policy. The coming weeks will be crucial in observing how the Federal Reserve navigates this shifting economic terrain.