July job losses reshape Fed rate outlook, lift stocks and gold

The U.S. economy shed 23,000 nonfarm payrolls in July, far short of the roughly 80,000 gain economists had forecast. Government hiring fell by 53,000, while private employers added just 30,000 jobs versus an expected 78,000. The unemployment rate dipped to 4.1% from 4.2%, but the drop reflected a shrinking labor force rather than hiring strength: the labor force fell by 264,000 and the participation rate slid to 61.4%, its lowest since early 2021.

Revisions cut May and June payroll figures by a combined 103,000, pointing to a weaker three-month hiring trend than previously reported. Average hourly earnings rose 3.2% over the year, the slowest wage growth since 2021.

The weaker jobs data reduced the odds of a Federal Reserve interest rate increase, with September hike odds falling to 42% from 58%, according to the CME FedWatch tool. Lower rate expectations pulled down Treasury yields and the dollar, helping fuel a stock market rally: the S&P 500 gained 3.5% for the week and the Nasdaq 100 rose 4.8%, their best weekly performances since April and early May, respectively. Gold rose 2.4% Friday to $4,347.70 an ounce, up about 7.5% for the week.

The next major data point is the July consumer price index, due Aug. 12, with economists expecting headline inflation to ease to 3.4% and core inflation to slow to 2.5%.

Read the full story at benzinga.com.