Weak July Jobs Report Cools Rate-Hike Odds
The July jobs report was released Friday morning. Here's what the data show.
The July jobs report came in much weaker than expected, lowering expectations that the Federal Reserve will raise interest rates at its September meeting.
According to the Bureau of Labor Statistics, the U.S. lost 23,000 jobs in July, missing economists' estimates for the addition of 85,000 new jobs.
Additionally, job growth for May was downwardly revised by 66,000, from +129,000 to +63,000, and June's figure was lowered by 37,000, from +57,000 to +20,000. This results in 103,000 fewer jobs than previously reported.
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The unemployment rate, which is derived from a separate survey, edged down to 4.1% from 4.2% in June as the labor force participation rate fell to 61.4%.
Local government led job losses, shedding 50,000 positions, while retail trade, which includes warehouse clubs, gas stations and general merchandise retailers, lost 19,000 jobs.
Healthcare, on the other hand, added 22,000 new positions.
Odds of a rate hike at the September Fed meeting fell after the release of the July jobs report. According to CME Group FedWatch, futures traders are now pricing in a 44% chance the central bank will increase the federal funds rate next month, down from 55% one day ago.
ADP jobs report also came in lower than expected
Wall Street got a glimpse of how things are going in the labor market early Wednesday, with ADP's National Employment Report, which showed private payrolls rose by 44,000 in July — well below the 95,000 jobs added in June and the 75,000 economists expected.
"Job-changers are highly sensitive to real-time economic conditions, and their rapid pay growth implies supply constraints in parts of the labor market," says Dr. Nela Richardson, chief economist at ADP. "Typical hiring patterns, meanwhile, are changing as employers react to shifting macro-economic conditions."
With the July jobs report on the books, we looked at what economists, strategists and other experts on Wall Street have to say about the results and what they could mean for the Fed and investors going forward. You'll find these reactions, edited at times for brevity, below.
What Wall Street says about the July jobs report
"The July payroll release disappointed across the board reversing the trend of this year's positive labor market momentum. The combination of negative headline job creation and downward revisions stand in contrast to the lower unemployment rate, presenting conflicting signals for the Fed in regard to the overall health of the labor market. Today's release should be modestly positive for risk assets as yields come down and expectations for rate hikes are pushed out." - Jeff Schulze, Head of Economic and Market Strategy at ClearBridge Investments
"Headline payrolls were really disappointing, with 23,000 jobs lost in July. But the weakness was concentrated in local government, largely due to school-calendar seasonal effects, and leisure and hospitality as the World Cup boost rolled off. The bigger picture is that unemployment fell to 4.1%, its lowest in a year. Combined with low initial jobless claims, that suggests the labor market remains in solid shape despite the volatility in payrolls." - Sonu Varghese, Chief Market Strategist at Carson Group
"The weaker-than-expected jobs report likely doesn't change much for the Federal Reserve, as Chair Warsh is allowing the data to guide policy and the data as of now likely warrants keeping rates at current levels. Friday's negative jobs number raises the importance of next Wednesday's CPI for July, which may see an uptick, since oil prices spiked during the second half of July, given the re-escalation of tensions in Iran. This may very well be one of the more noisy CPI reports in recent memory." - Brent Wilsey, Chief Investment Officer at Wilsey Asset Management
"While the unemployment rate is falling, that is mostly for the wrong reason — not enough workers. Immigration compensated for the aging of the workforce in the first few years of the post-pandemic expansion, but that's not happening anymore. At the same time, the job market is doing a mediocre job of providing opportunities for new entrants. Unemployment among workers aged 20-24 without prior work experience, a good proxy for the Class of 2026, was 242,000, down slightly from 253,000 in July of 2025. The last two years have seen the highest unemployment for recent grads since 2016. In the broader context, the July jobs report shows that job growth was slow in the middle of 2026, but the job market is still tightening due to a shrinking labor force." - Bill Adams, Chief U.S. Economist at Fifth Third Commercial Bank
"The July jobs report is a game changer in the sense that all of the recent focus has been on inflation and this report highlights the risks that are embedded in the labor market as well. Before today, many were expecting that the Fed had no choice but to raise rates in order to fight stubbornly high inflation, because the job market was so strong, but this report shows that isn't the case. Next week's CPI release will be important — and if the data continues to come in higher than expected, it could raise the probability of a rate hike at the Fed’s next meeting — but today's jobs numbers should be enough to keep the Fed on hold for at least another meeting, which all things being equal is a positive for the stock market." - Chris Zaccarelli, Chief Investment Officer for Northlight Asset Management
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