US Labor Market Falters as Nonfarm Payrolls Plummet

The US labor market showed signs of fatigue in July, according to the latest employment report. Nonfarm payrolls fell by 23 thousand, far below the expected gain of 80 thousand and a downward revision from June's figure of 20 thousand.

The unemployment rate edged down to 4.1%, meeting market estimates, while wage growth slowed to 3.2% year-over-year, missing forecasts of 3.5%. The decline in nonfarm payrolls marks the second job loss in five months, as employers become more cautious about hiring due to uncertainty over US tariff policy and the ongoing conflict with Iran.

The weak jobs report has increased the likelihood of another hold by the Federal Reserve at its September meeting, with a 58% probability of a hold and a 42% chance of a rate hike, according to CME's FedWatch. The labor market is showing signs of fatigue while inflation remains high at 3.5%, above the Fed's target of 2%. Fed Chair Kevin Warsh favors lowering rates, but will need inflation to decrease before making a move.