Key Takeaways:
U.S. non-farm payrolls rose by just 73,000 in July, well below forecasts.
Job growth for May and June was significantly revised downward.
Market expectations for a September Fed rate cut surged from 41.3% to 80.3%.
Fed Governor Kugler will resign, giving Trump an early opportunity to appoint a replacement.
The U.S. economy added only 73,000 jobs in July, according to new data released Friday, marking a sharp slowdown in labor market growth and fueling expectations of a Federal Reserve interest rate cut as early as September.
The weak July print came alongside substantial downward revisions to the job numbers for May and June, reinforcing concerns that the labor market is cooling faster than anticipated. The slowdown has led markets to price in an 80.3% probability of a 25 basis point rate cut at the Fed's next meeting, up from just 41.3% prior to the jobs report, according to CME FedWatch Tool data.
Political Shake-Up at the Fed
Adding to the monetary policy implications, Federal Reserve Governor Adriana Kugler is expected to resign next week, opening the door for U.S. President Donald Trump to appoint a new board member ahead of schedule. The move could further tilt the Federal Reserve’s policy stance heading into a critical economic period.
Implications for Markets and the Fed
Economists say the weak employment data strengthens the case for the Fed to begin easing interest rates, especially in the context of slowing inflation and fragile consumer confidence. However, the Fed may face political pressure as Trump’s influence grows over central bank appointments.
Traders will now turn their focus to the August CPI release and Jackson Hole symposium later this month for additional signals about the Fed’s next move.