us job growth falters, fed rate cut looms

2025-08-01 general

Washington, Friday, 1 August 2025.
The latest jobs report reveals a significant slowdown in us job creation. July saw only 73,000 new non-farm payrolls, far short of the expected 100,000 to 110,000. May and June figures faced downward revisions. This disappointing growth fuels speculation of a federal reserve interest rate cut. Markets reacted swiftly. The dollar weakened, and expectations for a rate cut in September are rising. Trump even pressured the fed for immediate action via social media. This situation may impact investment strategies, especially in sensitive sectors like semiconductors.

Revised employment figures

The labor department’s report also included revisions to previous months. The may increase was revised down from 144,000 to just 19,000. June’s increase also fell from 147,000 to 14,000 [2]. The average monthly increase over the last three months is now only 35,000, the lowest level since the COVID-19 pandemic [2]. This slowdown raises concerns about the overall health of the labor market and its potential impact on economic growth [2].

Sectoral changes and unemployment

Job growth was not uniform across sectors. Healthcare saw increases, but manufacturing declined for the third consecutive month [2]. The unemployment rate edged up to 4.2% in july, slightly higher than the 4.1% recorded in june [2]. Despite the increase, the unemployment rate remains within a relatively stable range that has persisted since may 2024 [4]. These figures suggest a cooling labor market, which may influence the federal reserve’s monetary policy decisions [2].

Market reactions and currency impacts

Financial markets responded swiftly to the jobs data. Expectations that the federal reserve will cut interest rates at its september meeting have increased [2]. The yield on the 2-year treasury note fell sharply, as bond prices rose [2]. In foreign exchange markets, the dollar weakened, with the yen rising sharply to ¥148 against the dollar [1][2]. This currency movement reflects increased uncertainty about the us economic outlook and potential shifts in monetary policy [1].

Expert opinions and fed outlook

Analysts are divided on the fed’s next move. Some believe that the weak jobs data will force the fed to cut rates as early as september [4]. Others suggest the fed may remain cautious, waiting for further data on inflation and the impact of trade policies [4][7]. Richmond fed president thomas barkin recently stated that there is no urgent need to cut interest rates, citing a ‘solid’ economic performance [7]. However, he emphasized the importance of assessing upcoming data on employment, inflation, and trade [7].

adp employment change

The adp national employment report, which measures private sector employment, showed a gain of 104,000 jobs in july, a strong rebound from a revised loss of 23,000 jobs in june [3]. This figure exceeded market expectations of a 75,000 increase [3]. The service sector added 74,000 jobs, led by leisure and hospitality [3]. However, employment in education and health services decreased by 38,000 [3]. The adp report’s accuracy in predicting the government’s non-farm payroll figures has varied in recent years [7].

Wage growth and labor market trends

Wage growth remains relatively stable. The employment cost index for civilian workers increased by 0.9% in the second quarter of 2025, slightly above the market forecast of 0.8% [5]. Wages and salaries rose by 1%, while benefit costs decreased [5]. Other indicators suggest a softening in the labor market. The number of job postings on indeed, a major job site, has fallen to a four-year low [2]. The percentage of consumers saying jobs are plentiful has also declined [2].

Bronnen

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