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Weak jobs data raises expectations for Fed rate cuts

The U.S. added only 73,000 jobs in July, prompting speculation of imminent Federal Reserve action.

August 1, 2025 at 08:08 PM

Shockingly bad jobs report reveals a months-long stall and may trigger Fed rate cuts soon. 'Powell is going to regret holding rates steady'

Recent labor data pushes Wall Street to anticipate Federal Reserve rate cuts.

Weak jobs report raises expectations for Fed rate cuts soon

The U.S. labor market shows signs of weakness, with recent payroll numbers disappointing investors. The Labor Department reported an addition of only 73,000 jobs in July, significantly lower than predictions of 100,000. More shocking were the downward revisions for prior months, particularly where May's figures fell from 144,000 to just 19,000. The unemployment rate also crept up to 4.2%, highlighting a shrinking labor force. In reaction to this data, stock markets dropped, with the S&P 500 down 1.6%. Analysts believe this weak performance will prompt the Federal Reserve to cut interest rates as early as September, potentially by 50 basis points.

Key Takeaways

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U.S. payroll growth was only 73,000 in July, far below forecasts.

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Prior months' job figures were significantly downgraded, revealing a labor stall.

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The unemployment rate increased to 4.2% as the labor force shrank.

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The weaker data has led to predictions of a Federal Reserve rate cut.

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Stock markets reacted negatively, with the S&P 500 and Nasdaq falling significantly.

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A cautious Fed may need to consider supply issues impacting employment.

"Powell is going to regret holding rates steady this week"

Jamie Cox predicts the Fed will cut rates soon based on poor job growth.

"The revisions put May’s headline NFP at 19k and June’s at 14k"

Adam Hetts highlights how revised data alters perceptions of job market resilience.

"The Fed has no reason to loosen monetary policy in response to a decline in job growth driven by labor supply"

Preston Caldwell points out the implications of job growth decline for Fed policy decisions.

"If it shows labor supply declined again and held the unemployment rate steady, the Fed is likely to hold rates steady"

Bill Adams emphasizes the Fed's cautious approach depending on labor data trends.

These labor statistics paint a troubling picture for the economy. The reduced job creation figures reflect broader tensions in the labor market, influenced by both demand and supply dynamics. While the overall unemployment rate remains steady, underlying factors such as the decline in foreign-born workers suggest that the Fed might face challenges in addressing inflation while supporting growth. This juxtaposition creates a dilemma as policymakers weigh whether to intervene. Market reactions indicate a growing concern, and the revisions suggest that confidence in economic resilience may be waning.