U.S. Job Growth Slows Sharply in July; Prior Months Revised Lower as Fed Rate Cut Hopes Rekindle

The U.S. labor market lost steam in July, with job creation falling well short of expectations and prior months’ gains seeing significant downward revisions — developments that may add pressure on the Federal Reserve to consider rate cuts in the coming months.

Nonfarm payrolls increased by just 73,000 in July, according to data released Friday by the Bureau of Labor Statistics. While an improvement over June’s revised figure of 14,000, it was well below the 110,000 median forecast from economists. The June total was slashed from an initially reported 147,000, and May’s gain was revised down dramatically from 144,000 to 19,000.

Together, the data points to an average of just 35,000 jobs added per month from May through July — the weakest three-month stretch for hiring since the early months of the COVID-19 pandemic in 2020, according to Bloomberg’s Matthew Boes.

The unemployment rate ticked up to 4.2%, in line with consensus but above June’s 4.1%, reinforcing signs of a cooling labor market.

Markets reacted swiftly to the report. While Bitcoin (BTC) edged higher from overnight lows to trade near $115,800, the 10-year Treasury yield dropped 10 basis points to 4.30%, and the U.S. dollar weakened nearly 1% against both the euro and yen.

The data could complicate the Federal Reserve’s hawkish messaging earlier this week. Although the central bank held its benchmark federal funds rate steady at 4.25%-4.50%, Chair Jerome Powell signaled caution over near-term cuts. Following today’s report, however, expectations for a September rate cut rebounded to 55%, according to CME FedWatch — up from 40% earlier this week, though still below the 75% odds seen a month ago.

In addition to calls from President Trump for looser monetary policy, Powell may now face internal pressure. Two Fed governors, Chris Waller and Michelle Bowman, voted to cut rates this week — signaling a growing divide within the central bank over how to respond to slowing economic data.