The US labor market handed Wall Street an unexpected gift on Thursday morning. July nonfarm payrolls fell by 23,000 jobs, a result that landed nowhere near economist forecasts calling for a gain of somewhere between 80,000 and 95,000. Markets loved it.
S&P 500 futures climbed roughly 0.53% following the release. Nasdaq 100 futures jumped 1.16%, and Dow E-minis added 0.31%. The logic is counterintuitive but well-established by now: bad news for workers can be good news for stocks, because softer labor data reduces the pressure on the Federal Reserve to keep tightening monetary policy.
What the numbers actually said
The headline payroll figure was striking enough on its own, but the revisions made it sharper. June’s initial reading of 57,000 jobs added was revised down to just 20,000, suggesting the labor market had been cooling faster than official data had indicated.
The unemployment rate did edge lower, falling to 4.1% from 4.2% in June. That sounds like a contradiction, but it isn’t entirely. The decline in the participation rate, meaning fewer people are actively looking for work, can mechanically push the unemployment rate down even as overall hiring slows. Economists sometimes describe this labor market dynamic as “slow hire, slow fire,” a state where companies are neither aggressively adding staff nor laying workers off in large numbers.
