Reviewing the Jobs Report

July’s jobs report contained grim news—the economy added just 73,000 jobs, and even worse, the May and June numbers were revised downward by a combined 258,000 from previous reports. There is a silver lining in that due to decreased immigration and retirement by baby boomers, the amount of jobs expansion needed to keep up with population growth has fallen—according to Jed Kolko, this “breakeven rate” has fallen from 166,000 to 86,000 over the past eighteen months. So, the July number of 73,000 isn’t far below par, but the revised May and June numbers, at 19,000 and 14,000, respectively, indicate a weakening labor market.

Markets are expecting the Fed to cut rates by 25bp in September, and then to issue 1-2 more 25bp cuts by the end of the year. The Fed is understandably concerned about inflation, which is projected to rise due to increased tariffs. While some Fed officials believe that tariff-induced inflation will be temporary in nature, Fed Chair Jerome Powell has emphasized the need to wait for more inflation data to come in.

As Josh Barro argues, the combination of a cooling labor market and slowing gdp growth makes it likely that the Fed will cut rates in the coming months. However, Barro also notes that high budget deficits will make it more difficult for the Fed to cut rates without spurring inflation. Growth, too, may be hampered by uncertainty about both short-term and longer-term tariff policy. The hope is that the cooling economy does not sink over time into recessionary territory.

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This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument or investment strategy. This material has been prepared for informational purposes only, and is not intended to be or interpreted as a recommendation. Any forecasts contained herein are for illustrative purposes only and are not to be relied upon as advice.