Nasdaq<\/a> down 2.2%. The 10-year Treasury yield sank more than 15 basis points to 4.208% as Wall Street priced in a rate cut at the Fed\u2019s meeting next month and more later in the year. The yield on the two-year Treasury, which is more sensitive to Fed rates, plunged almost 27 basis points.<\/p>\nMarkets were slumping before the jobs data as Trump announced fresh tariff rates on U.S. trading partners, with some higher than before, as well as an additional 40% duty for all transshipped goods.<\/p>\n
After the jobs report, Trump reiterated his months-long demand for the Fed to lower rates, while Cleveland Fed President Beth Hammack stood by the central bank\u2019s decision on Wednesday to keep policy steady.<\/p>\n
Still, Wall Street noted that the revisions put the labor market in a starkly different light, after it looked remarkably resilient since Trump launched his trade war.<\/p>\n
\u201cHeadline NFP at 73k is a miss, but perhaps more concerning is -258k net revisions to the prior two months. These revisions put May\u2019s headline NFP at 19k and June\u2019s at 14k,\u201d Adam Hetts, global head of Multi-Asset and portfolio manager at Janus Henderson Investors, said in a note. \u201cHad those figures been the initial prints a month or two ago it would have significantly changed the labor market narrative over the entire summer. Indeed, odds of a September rate cut are increasing significantly on the back of this data release.\u201d<\/p>\n
Labor supply vs. demand<\/p>\n
Other analysts noted that other details don\u2019t suggest there\u2019s a total collapse in employment. The unemployment rate hasn\u2019t changed much for a while. Wages are still growing at a healthy clip, putting more money in consumers\u2019 wallets.<\/p>\n
Meanwhile, weekly jobs claims data has been steady overall too, meaning there hasn\u2019t been a widespread surge in layoffs.<\/p>\n
A critical question is whether the muted job gains are due to slow labor supply or slow demand. Supply has taken a big hit since Trump launched his immigration crackdown, and Friday\u2019s payroll report showed that the number of foreign-born workers in the labor force has shrunk by 1.2 million in the last six months.<\/p>\n
As a result, even a tepid uptick in hiring will barely move the needle on the jobless rate. In fact, Powell suggested on Wednesday that the unemployment rate merits closer attention than the payroll number since less demand is needed to offset supply.<\/p>\n
Whether supply or demand is the culprit has major implications for the Fed, according to Preston Caldwell, chief U.S. economist at Morningstar.<\/p>\n
\u201cThe Fed has no reason to loosen monetary policy in response to a decline in job growth driven by labor supply \u2014 as such a decline is neither deflationary nor does it create a gap with respect to maximum sustainable employment,\u201d he wrote in a note. \u201cOn the other hand, the speed of the deceleration in job growth, along with uncertainty about what exactly the data means, should be alarming to the Fed, and argues strongly for a September cut as a prophylactic measure at the least.\u201d<\/p>\n
But Bill Adams, chief economist for Comerica<\/a> Bank, noted that Trump\u2019s tariffs are still putting upward pressure on inflation, making it less clear-cut that the Fed will ease policy soon.<\/p>\nHe also pointed to labor supply, specifically that the overall labor force has fallen for three consecutive months. Fed policymakers will see another jobs report before their September meeting.<\/p>\n
\u201cIf it shows labor supply declined again and held the unemployment rate steady while tariffs push up inflation, the Fed is likely to hold interest rates steady again,\u201d Adams wrote in a note.<\/p>\n","protected":false},"excerpt":{"rendered":"The U.S. labor market looks much weaker than previously thought, and Wall Street now expects the Federal Reserve…\n","protected":false},"author":3,"featured_media":111415,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6],"tags":[64,11410,1597,4054,67,132,68],"class_list":{"0":"post-111414","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-business","8":"tag-business","9":"tag-fed-interest-rates","10":"tag-federal-reserve","11":"tag-u-s-jobs-report","12":"tag-united-states","13":"tag-unitedstates","14":"tag-us"},"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@us\/114955927635355209","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/111414","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/comments?post=111414"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/111414\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media\/111415"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media?parent=111414"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/categories?post=111414"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/tags?post=111414"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}