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Do you want the bad news first, or the other bad news first?
This morning, we learned that not only has the unemployment rate risen, but prior jobs gains were revised dramatically lower—revealing that the US labor market is on far weaker footing than we thought.
Here are the details:
- The unemployment rate climbed to 4.2% in July from 4.1% in June
- Payrolls increased just 73,000 last month, far below forecasts of roughly 104,000
- Even worse: May’s job numbers were revised from 144,000 to only 19,000, while June jobs were cut from 147,000 down to 14,000.
- Which means over the past three months, employment has only risen an average of 35,000—the worst three months of jobs growth since the pandemic years.
“Had those figures been the initial prints a month or two ago it would have significantly changed the labor market narrative over the entire summer,” explained Global Head of Multi-Asset and Portfolio Manager at Janus Henderson Investors Adam Hetts in a note today.
Where did all those jobs go?
Previous monthly numbers are always revised, but the sudden disappearance of 258,000 jobs is raising eyebrows across Wall Street. It sheds light on a growing problem: Economic data is getting harder and harder to trust.
Earlier this year, the White House dismissed two independent advisory committees that provided input on macro data like prices and unemployment. Last month, the Bureau of Labor Statistics—the department behind today’s jobs report—announced it was cutting back on collecting price data that feeds into inflation measurements due to layoffs and budget cuts. And just earlier this week, the BLS noted that it collected 19% less data in June than it had in May due to those cutbacks.
Apparently, the president was just as unpleasantly surprised as the rest of us. Trump fired BLS commissioner Erika McEntarfer this afternoon, taking to Truth Social to note that she is a Biden administration appointee, and implying that she manipulated job numbers for political reasons.
The Fed is torn
This economic puzzle is not an easy one for the Fed to figure out, and that’s before even considering the added complications that come with Trump doing everything he can to undermine Jerome Powell’s credibility.
The central bank kept interest rates steady yesterday, but today’s jobs numbers—along with a slew of other macroeconomic data points pointing to a weaker economy and persistent inflation—seems to suggest a rate cut could be in our future.
Traders are currently pricing in a 93.7% chance of a rate cut at the Fed’s September 17 meeting—which is a whole lot higher than the 37.7% probability of a rate cut the market had priced in yesterday, before today's labor market letdown.—LB