US Labour Market Slows Sharply, Intensifying Pressure on Federal Reserve

The US labour market decelerated significantly over the past three months, with the addition of just 73,000 jobs in July. Hiring figures for May and June were revised downward by a combined 258,000, marking a notable shift from the 380,000 posts added in the previous quarter. This slowdown has heightened pressure on the Federal Reserve to respond to President Donald Trump's calls for a reduction in borrowing costs. The jobs report follows GDP data that suggested the economy is losing momentum, with consumer spending cooling in the first half of 2025.

Key Takeaways:

• The US labour market added only 73,000 jobs in July, a significant slowdown from the 380,000 posts added in the previous quarter.
• Hiring figures for May and June were revised downward by a combined 258,000, indicating a substantial downward revision of previously reported numbers.
• The unemployment rate remained steady at 4.2 per cent, but the overall decrease in job growth is a cause for concern.
• Trump has called on the Federal Reserve to cut interest rates, with Fed chair Jay Powell facing increased pressure to act.
• Stephen Miran, chair of the White House Council of Economic Advisers, attributed the slowdown in part to "uncertainty" on trade.
• Short-term US government debt rallied sharply, with yields on two-year Treasuries dropping 0.24 percentage points to 3.72 per cent, their biggest decline in almost a year.
• Traders now expect a 90 per cent chance of a quarter-point cut at the next Fed meeting, up from 45 per cent earlier.
• The market is anticipating two or three rate cuts by the end of 2025.
• The Institute for Supply Management's manufacturing index showed a further decline in factory activity in July.

Statistics:

• 73,000 job additions in July
• 258,000 revision downward of hiring figures for May and June
• 380,000 posts added in the previous quarter
• Unemployment rate: 4.2 per cent
• 0.24 percentage point drop in yields on two-year Treasuries
• 3.72 per cent yield on two-year Treasuries
• 90 per cent chance of a quarter-point cut at the next Fed meeting
• Two or three rate cuts expected by the end of 2025

Sources:

"The US labour market slowed sharply in the past three months, according to data released yesterday that intensified pressure on the Federal Reserve to bow to Donald Trump's calls to slash borrowing costs. The world's biggest economy added just 73,000 jobs in July..." - The Financial Times

"...hiring figures for May and June lowered by a combined 258,000, in an unusually big revision by the Bureau of Labor Statistics." - The Financial Times

"...the 106,000 posts added from May to July marked a plunge from the 380,000 added in the previous quarter." - The Financial Times

"...the unemployment rate was steady from the previous month at 4.2 per cent." - The Financial Times

"...the Institute for Supply Management manufacturing index showed a fall in factory activity accelerated in July as new orders and employment continued to contract." - The Financial Times