US Economy Loses Jobs, But Wall Street Parties On

The US economy lost jobs in July, but Wall Street celebrated with its best week since April. The Federal Reserve's next move was supposed to be a rate hike, but the shrinking payroll count took it off the table.

The Labor Department reported that nonfarm payrolls fell by 23,000 in July, far short of the expected gain of 80,000. Private employers still added jobs, but government hiring whiffed. The unemployment rate ticked down to 4.1% from 4.2%, but that was not strength.

The heavier blow came in the revisions, which cut May and June payrolls by a combined 103,000. This left the three-month trend materially weaker than the market believed. Average hourly earnings rose 3.2% on the year, the slowest wage pace since 2021.

A contracting payroll count removes the case for tightening into a slowing economy, which sent odds of a September increase falling to 42% from 58%. Lower expected policy rates pulled Treasury yields and the dollar down together, making long-duration technology stocks and gold shine.