July jobs report not good

Briefing.com Summary:

*Solid wage growth can’t hide ugly jobs data—hiring activity is losing steam

*The July employment report exposes the Fed as being behind the curve with rate cuts

*Apple shines, but Amazon flops after earnings reports

A big week of news is ending with a big day of news that features reactions to the earnings reports from Amazon.com (bad) and Apple (good); reactions to higher tariff rates for notable countries like Canada (35%), Taiwan (20%), India (25%), and Brazil (50%), and a 40% transshipment tariff rate that are going into effect August 7; and reactions to a slate of data highlighted by the July Employment Situation Report and the July ISM Manufacturing Index.

The S&P 500 futures are down 65 points and are trading 1.0% below fair value, the Nasdaq 100 futures are down 277 points and are trading 1.1% below fair value, and the Dow Jones Industrial Average futures are down 390 points and are trading 0.9% below fair value.

In brief, the early reaction to all this news has been negative, and that has to do in part with the negative price action seen yesterday after the terrific earnings reports from Microsoft (MSFT) and Meta Platforms (META).

There will be follow-through selling at the open, and the July employment report can be considered a compounding factor. It was not good.

Nonfarm payrolls growth was weak in July and much weaker than thought in prior months, with employment in May and June combined 285,000 lower than previously reported. The unemployment rate was decent at 4.2%, but the U-6 unemployment rate, which accounts for underemployed workers, jumped to 7.9% from 7.7%, the labor force participation rate went down, and persons unemployed for 27 weeks or more increased to 24.9% of the unemployed from 23.3% in June. Average hourly earnings growth was decent at 0.3% and was up 3.9% year-over-year, versus 3.8% in June.

The key takeaway from the report is the soft nonfarm payrolls situation, as that will stoke concerns that the Fed is behind the curve, which in turn could stoke concerns that economic and earnings growth prospects are not as bright as currently envisaged. That could pose problems for a richly valued stock market, unless it trades through that noise and focuses on the notion that rate cuts are sure to follow.

The Treasury market and fed funds futures market are aligned with the latter outlook. The 2-yr note yield, which is more sensitive to changes in the fed funds rate, is down 17 basis points to 3.78%, and the 10-yr note yield is down nine basis points to 4.27%. Meanwhile, the probability of a 25-basis point rate cut to 4.00-4.25% at the September FOMC meeting has increased to 67.1% from 37.7% a day ago, according to the CME FedWatch Tool.

Notable headlines from the July Employment Situation Report:

• July nonfarm payrolls increased by 73,000 (Briefing.com consensus: 102,000). The 3-month average for total nonfarm payrolls decreased to 35,000 from 64,000. June nonfarm payrolls revised to 14,000 from 147,000. May nonfarm payrolls revised to 19,000 from 144,000.
• July private sector payrolls increased by 83,000 (Briefing.com consensus: 110,000). June private sector payrolls revised to 3,000 from 74,000. May private sector payrolls revised to 69,000 from 137,000.
• July unemployment rate was 4.2% (Briefing.com consensus: 4.2%) versus 4.1% in June. Persons unemployed for 27 weeks or more accounted for 24.9% of the unemployed versus 23.3% in June. The U6 unemployment rate, which accounts for unemployed and underemployed workers, increased to 7.9% from 7.7% in June.
• July average hourly earnings were up 0.3% (Briefing.com consensus: 0.3%) versus 0.2% in June. Over the last 12 months, average hourly earnings have risen 3.9% versus 3.8% for the 12 months ending in June.
• The average workweek in July was 34.3 hours (Briefing.com consensus: 34.2) versus 34.2 hours in June. Manufacturing workweek held at 40.1 hours. Factory overtime dipped to 2.8 hours.
• The labor force participation rate decreased to 62.2% from 62.3%.
• The employment-population ratio decreased to 59.6% from 59.7%.

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Originally Posted August 1, 2025 – July jobs report not good