US job growth slows, fuels rate cut speculation

by MarketNewsData

Markets tumble as weak jobs report and trade tensions shift rate cut expectations

The U.S. labor market stumbled in July with payrolls rising just 73,000—far below expectations—and previous job gains revised sharply downward. The surprise downturn, paired with renewed trade tensions, sent stocks sliding and spurred a surge in bets that the Federal Reserve will cut rates at its September meeting.

📊 July 2025 Jobs Report Highlights

  • Nonfarm Payrolls:
    +73,000 (vs. ~110,000 expected)
    Weakest gain since January 2021

  • Revisions:
    May and June job gains were revised down by a combined 258,000, signaling deeper labor market softness than initially reported.

  • Unemployment Rate:
    Rose to 4.2% from 4.1% in June.

  • Average Hourly Earnings:
    +0.3% month-over-month
    +3.9% year-over-year

  • Sector Breakdown:

    • Healthcare: +55,000

    • Social Assistance: +18,000

    • Federal Government: –12,000
      Most other sectors showed limited or negative growth.

📉 Market Reaction – August 1, 2025

  • S&P 500: 6,238.01 -101.38 (−1.6%)

  • Dow Jones: 43,588.58  -542.40 (−1.2%)

  • Nasdaq Composite: 20,650.13  -472.32 (−2.2%)

  • Bond Yields:

    • 2-year Treasury: Fell ~23 basis points to 3.72%

    • 10-year Treasury: Down to 4.22%

  • Rate Cut Odds:
    Probability of a September rate cut jumped to above 80%, up from about 38% prior to the report.

  • SPY ETF (S&P 500 Tracker):
    Closed at $621.72, down 1.6% on the day

Markets broadly sold off as traders reacted to the jobs data and additional headwinds from new tariffs targeting key trading partners. Tech stocks were hit hardest, while safe-haven assets like Treasuries and gold saw inflows.

🧠 Economic Outlook and Fed Implications

  • The combination of a weak July report and sharply lower prior revisions paints a picture of a cooling labor market, raising concerns over the pace of economic growth.

  • Wage growth at 3.9% continues to outpace inflation (~2.8%), supporting consumer spending for now, though analysts caution this trend may not last if hiring continues to slow.

  • The Federal Reserve’s next meeting is scheduled for September 17–18, with one more jobs report (August data) due September 5. Markets are now firmly pricing in at least one rate cut by year-end, with September in sharp focus.

  • Some Fed officials have reportedly pushed for an earlier move, citing the risk of falling behind the curve if labor softening persists.

🔍 Summary Table: Key Data & Market Response

Metric Value
July Payrolls +73,000
May–June Revisions –258,000 (combined)
Unemployment Rate 4.2% (↑ from 4.1%)
Avg. Hourly Earnings (YoY) +3.9%
S&P 500 6,238.01 (−1.6%)
Dow Jones 43,588.58 (−1.2%)
Nasdaq Composite 20,650.13 (−2.2%)
2-Year Treasury Yield ~3.72%
10-Year Treasury Yield ~4.22%
September Rate Cut Odds 80%+

✅ Final Take

The July jobs report and major revisions have sparked a clear shift in the Fed narrative. With hiring slowing, unemployment ticking higher, and prior labor strength now in question, market sentiment has turned decisively dovish. Combined with trade tensions resurfacing, the path forward looks increasingly tilted toward easing.

Expect markets to remain sensitive to upcoming labor and inflation data, especially the August jobs report due September 5, which may confirm or challenge the Fed’s next move.

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