The US economy didn’t just miss expectations in July. It reversed course entirely. Nonfarm payrolls contracted by 23,000 jobs, a jarring miss against forecasts calling for roughly 80,000 new positions.
Within hours of the report’s release, the probability of a Federal Reserve rate hike in September dropped from around 57% to approximately 43.9%. The odds of the Fed simply holding rates steady at the current 3.5% to 3.75% range climbed to nearly 60%.
The numbers behind the shift
The headline payroll figure was bad enough on its own. But the revisions made it worse. Prior months’ employment figures were revised downward by a combined 103,000 jobs, meaning the labor market was softer than anyone thought even before July’s contraction showed up.
The unemployment rate ticked down from 4.2% to 4.1%. Wage growth held essentially flat at around 3.2% year-over-year, not hot enough to stoke inflation fears and not cold enough to signal a consumer spending collapse.
