US | Downward revisions to job gains show a weakening labor market

Summary

July U.S. labor data show sharp hiring slowdown: 73k jobs added, prior months revised -258k, jobless rate at 4.2%, participation at 62.2%. Wage growth stagnates; health care sole driver. Market sees 89% odds of Fed rate cut in September.

Key points

• Key points:
• Subdued job creation with nonfarm payrolls rising only 73k in July, alongside significant downward revisions to May and June totaling 258k, has brought the three-month hiring average to just 35k, underscoring a sharp deceleration in employment momentum.
• Labor market slack is evident as the unemployment rate increased to 4.2% and labor force participation fell to 62.2%, its lowest since November 2022.
• Wage dynamics show annual average hourly earnings growth holding at 3.9% while the three-month annualized rate accelerated to 4.1%, possibly reflecting tighter labor supply.
• Weak demand signals emerge with hiring freezes, reduced job openings, and a low quits rate suggesting a continued easing of labor market pressures.
• Policy implications are evident as the market-implied probability of a 25bp Fed funds rate cut in September surged to 89% following softer labor data.

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