U.S. Job Growth Misses Expectations as Revisions Signal Labor Market Weakness

Federal Reserve Rate Cut Odds Surge After Report

The weaker-than-expected jobs data and deep revisions have reignited expectations for Federal Reserve policy easing. Fed funds futures now price in a 63% chance of a rate cut in September, up sharply from 40% just one day earlier. Markets reacted swiftly: stock index futures slipped further, and Treasury yields dropped as traders repositioned for a more dovish Fed.

Fed Chair Jerome Powell is facing intensifying pressure, particularly from President Trump, who once again attacked Powell online, calling him a “stubborn MORON” and urging immediate rate cuts. While the central bank has so far held its benchmark rate steady, economic data like this could shift the FOMC’s stance in the coming weeks.

Sectors Show Uneven Performance—Health Care Leads, Government Contracts

July’s gains were heavily concentrated in the health care sector, which added 55,000 jobs, continuing its post-Covid expansion. Social assistance also contributed 18,000 jobs. However, federal government employment declined by 12,000 and is now down 84,000 since its January peak. The retrenchment is partially attributed to cost-cutting efforts initiated by Elon Musk’s Department of Government Efficiency.

Wage growth remained modest, with average hourly earnings up 0.3% month-over-month. The 3.9% year-over-year gain slightly beat expectations but failed to offset the broader weakness in hiring.

Market Outlook: Bearish Labor Data Strengthens Case for Fed Action

The latest jobs report reinforces signs of a deteriorating labor market, with limited sectoral strength and a broad-based cooling in hiring momentum. For traders, this adds weight to a bearish short-term view on yields and the dollar, while increasing the odds of a Fed rate cut in September. Equities may stay under pressure until clearer signs of monetary policy support or labor market stabilization emerge.