The July jobs report dropped and instantly wrecked whatever confidence was left in Jerome Powell’s “strong labor market” line.

Nonfarm payrolls rose by just 73,000, way below the 100,000 economists were hoping for, and barely higher than the revised June figure of 14,000. That’s what the BLS now says was added in June after slicing away more than 133,000 from the original estimate of 147,000.

May didn’t get spared either. The earlier 144,000 number got slashed to 19,000, meaning 125,000 vanished from that month too. Altogether, 258,000 jobs just evaporated from the last two months of data. That’s more than the population of Scottsdale, Arizona; gone.

And while all this is happening, the unemployment rate quietly rose to 4.2%, exactly what was forecast, but still higher than last month. This blew a wide hole in the entire narrative the Fed was trying to spin barely a day earlier.

Markets bet on a rate cut as Fed’s credibility takes a hit

Immediately after the report, traders jumped into action. CME’s FedWatch showed 75.5% odds of a rate cut at the next Fed meeting in September, up from 40% just 24 hours before. Kalshi traders echoed the same sentiment, pricing in 75% odds that Powell and crew will fold and ease.

Powell literally told reporters 2 days ago that the labor market was still “strong.” That quote didn’t even make it a full news cycle before looking ridiculous. The data landed and said otherwise. Loudly.

There are now only two ways to interpret this: either the job market is actually slipping into a recession, or the BLS data is so messed up that it’s missing a quarter million jobs over just two months. Neither is good. One means economic pain. The other means no one knows what’s really happening.

Bonds didn’t wait around to analyze. The two-year yield dropped 15 basis points to 3.80%, and the 10-year moved down 8 basis points. That kind of move screams “pivot incoming.”

So now, the idea of a September cut is no longer a “maybe.” It’s being priced in like a done deal. And Powell’s attempts earlier this week to cool down expectations just got steamrolled by raw numbers.

Meanwhile, as always, Trump is slamming the Fed publicly again, calling for an immediate cut. On Truth, he said “Too Little, Too Late. Jerome “Too Late” Powell is a disaster. DROP THE RATE! The good news is that Tariffs are bringing Billions of Dollars into the USA!”

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