Institutional comments on non-agricultural workers in July: employment figures cooled significantly, and the door to interest rate cuts reopened in September?

U.S. job growth slowed more than expected in July, while the previous month's data was revised down sharply, indicating a significant cooling in the labor market.

The nonfarm payrolls report released by the Bureau of Labor Statistics on Friday showed that non-farm payrolls increased by 73,000 in July. Economists polled by Reuters had forecast a 110,000 job growth in July. The unemployment rate rose to 4.2 percent from 4.1 percent in June, with forecasts ranging from zero to 176,000.

The number of new non-farm payrolls in May was revised from 144,000 to 19,000; the number of new non-farm payrolls in June was revised from 147,000 to 14,000. After the revision, the total number of new jobs added in May and June was 258,000 lower than before the revision. Employment in health care and social assistance continues to trend upward. The federal government continues to cut jobs. The unemployment rate is 4.2% and the number of unemployed is 7.20 million. The unemployment rate has remained in a narrow range of 4.0% to 4.2% since May 2024.

Institutions look at the market outlook

Canadian Imperial Bank of CommerceAli Jaffery, analyst at Capital Markets, commented on the US non-farm payroll data: Today's report presents a different picture of the job market than Powell described earlier this week, and raises the possibility that the Federal Reserve will act sooner. That said, it depends on whether the next few inflation reports show persistence and whether the job market weakens further. After all, the unemployment rate is still at a reasonable level, and even the worst report will not be enough to make all the hawks change their stance entirely.

Guy Berger, a senior fellow at the Burning Glass Institute, a labour market think-tank, believes the economy remains stable: "Almost every major indicator has been fairly flat since last autumn." The policy environment has become the biggest variable. "I don't think stability is sustainable given tariffs, immigration restrictions and the new tax bill," notes Mr. Berger.

Annex Wealth Management CompanyBrian Jacobsen, the Fed's chief economist, pointed out that the report could not be glorified and that the labour market was in a "stall". He argued that the Fed could repeat the mistakes of last year and have to make up for this "wait and see" decision by cutting interest rates at its next meeting. He said that if Fed Chairperson Jerome Powell had known the data in advance, he might have also opposed the decision to continue to suspend interest rate cuts.

Gregory Faranello, Head of U.S. Rates Trading and Strategy, AmeriVet Securities"We expect the Fed to start cutting rates in September," he said, adding: "It's a little surprising that a few days ago the Fed chairperson was hinting at a strong labour market, and in the blink of an eye there are jobs numbers like this."

"Fed Speaker" Nick Timiraos: A slowdown in employment over the past three months could open the door for Federal Reserve officials to consider cutting interest rates at their next meeting in September. At the very least, it underscores the difficult balance they face as the economy slows and inflationary pressures pick up. With the labour market having previously shown solid job growth, Fed officials have been comfortable keeping rates on hold this year. But the sharp downward revisions in employment data for May and June have changed that. Fed officials have previously said they have reduced their focus on overall employment growth as it has fallen in tandem with the slowdown in the size of the labour force. When the labour supply shrinks, the unemployment rate is likely to remain stable or fall even as employment growth slows. But Fed chairperson Jerome Powell this week noted that stabilising unemployment could mask underlying weakness - an inherently fragile balance when fewer job seekers coincide with fewer job openings. He referred to "downside risks" to the labour market six times in his press conference, suggesting that actual weakness could justify policy easing.