U.S. Job Market Unexpectedly Contracted in July, Shifting Fed Rate Expectations

The U.S. labor market unexpectedly contracted in July, with the economy losing 23,000 jobs, according to the government’s Nonfarm Payrolls Report cited by CoinDesk. Economists had expected an increase of 80,000 jobs, making the result a sharp miss and the second straight month of weaker labor data.

The report matters because it could affect how investors assess the Federal Reserve’s next move. CoinDesk noted that the weak jobs figure may give the Fed more room to hold interest rates steady, even as inflation remains elevated. Before the data, interest rate traders were pricing a 55% chance of a September rate hike, according to CME FedWatch; after the report, that probability slipped to 46%.

Revisions added to the softer picture. June’s job gain was cut to 20,000 from an initially reported 57,000, while May’s gain was revised down to 63,000 from 129,000. The last negative payroll reading came in February, when the U.S. lost 156,000 jobs.

Other labor data was mixed. The unemployment rate dipped to 4.1%, below expectations for 4.2% and down from June’s 4.2%. Wage growth also came in weaker than forecast, with average hourly earnings rising 0.1% in July versus expectations for 0.3%; year over year, earnings rose 3.2%, below the expected 3.5%.

Markets reacted unevenly. U.S. stock index futures rose and interest rates fell, while gold gained 3% and silver rose nearly 6%. Crypto markets were comparatively quiet, with bitcoin only modestly higher on the session at about $65,000.