US Labour Market Slows Sharply, Intensifying Pressure on Federal Reserve

Strategic Insights -

The US labour market decelerated significantly in the last three months, with the addition of only 73,000 jobs in July, while the hiring figures for May and June were revised downwards by a combined 258,000. This rare and substantial revision by the Bureau of Labor Statistics has heightened the pressure on the Federal Reserve to consider reducing borrowing costs, as urged by President Donald Trump. The overall economy, as indicated by GDP data, is showing signs of losing momentum, with consumer spending slowing down in the first half of 2025.

Key Takeaways:

  • The US labour market added just 73,000 jobs in July, a significant slowdown from the 380,000 jobs added in the previous quarter.
  • The hiring figures for May and June were revised downwards by a combined 258,000, the largest revision in recent history.
  • The unemployment rate remained steady at 4.2 per cent, but the weak employment figures are a cause for concern.
  • President Trump has repeatedly urged the Federal Reserve to cut interest rates, citing the benefits of tariffs on the US economy.
  • The weak jobs report, coupled with slower GDP growth, has led to a significant shift in market expectations, with traders now putting a 90 per cent chance of a quarter-point cut at the next Fed meeting.
  • The market is expecting two or three rate cuts by the end of 2025, which would be a major shift in monetary policy.
  • The weak labour market data has led to a 1 per cent drop in the dollar against a basket of peers.

Statistics:

  • 73,000 jobs added in July, a significant slowdown from the 380,000 jobs added in the previous quarter.
  • 258,000 hiring figures revised downwards for May and June, a rare and substantial revision by the Bureau of Labor Statistics.
  • Federal Reserve now expected to cut interest rates by 2025, with two or three cuts predicted by market analysts.
  • 90 per cent chance of a quarter-point cut at the next Fed meeting, up from 45 per cent before the data release.
  • 4.2 per cent unemployment rate, steady from the previous month.
  • 1 per cent drop in the dollar against a basket of peers, after the weak labour market data.
  • 0.24 percentage points drop in yields on two-year Treasuries, their biggest drop in almost a year.

Sources:

  • The article does not specify the publication date of the data release.
  • Bureau of Labor Statistics (no date mentioned in the article).
  • In conversation with journalists, President Trump mentioned the article's quotes, without referencing a specific publication date.
  • ING analyst Chris Turner's quote is mentioned, but no specific publication date is provided.
  • White House Council of Economic Advisers, no publication date mentioned.
  • Federal Reserve, no publication date mentioned in the article.