The U.S. Bureau of Labor Statistics released the July employment report on August 2, indicating that the unemployment rate increased to 4.3% from 4.1% in June. Although the unemployment rate remains near historical lows and close to the natural rate of unemployment, it has been rising for four consecutive months.

At the same time, nonfarm payrolls increased by only 114,000, significantly below the 12-month average of 215,000. The year-over-year growth in average hourly earnings also declined from 3.8% to 3.6%, continuing its downward trend. Additionally, the number of initial jobless claims continues to rise.

During the July FOMC meeting, the Federal Reserve noted that it would more carefully balance the risks between the labor market and inflation. Fed Chair Jerome Powell also explicitly stated that he did not want to see further cooling in the labor market.

In light of the series of data showing a slowdown in the labor market, the market has started to anticipate more aggressive rate cuts at the September FOMC meeting. According to FedWatch data, the probability of a 50-basis-point rate cut has surged from 11.5% a week ago to 77.5%.

Read more at Datatrack

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