Jobs Shrink in the Summer of '25, Pre-Markets Lower

Friday, August 1, 2025

The all-important Employment Situation report for July — nonfarm payrolls and unemployment — is out this morning, and results are far below projections: +73K new jobs were filled last month, lower than the +100K expected. The Unemployment Rate ticked up 10 basis points (bps) to 4.2%, which is still historically very good.

The initial takeaway from this report is the massive downward revisions to the prior two months: June dialed way back from +147K to 14K — including only +3K new jobs in the private sector — and May from +144K to +19K. The trailing 4-month average in nonfarm payrolls is now around -100K fewer per month than the prior 4 months. In short, it’s a much weaker labor market this morning than we knew yesterday.

Hourly Wages still rose +0.3% for the month, as expected, up from +0.2% in June. Year over year, wages are +3.9%, up 10 bps from expectations, and +20 bps month over month. The Average Workweek ticked up to a still-lowish 34.3, but Labor Force Participation fell to 62.2% — not a strong number. The U-6 (aka "real unemployment") dipped a tad to 7.9%, relatively in-line with the historical average.

Let’s address the Unemployment Rate a moment: at 4.2%, the appearance is that a satisfactory number of Americans are still gainfully employed. However, with retirees in both the Baby Boomer and now Generation X populations averaging around 90-100K per month, many in the workforce would take their most recent pink slip and not become part of the unemployed, but part of the newly retired. Thus, unemployment in the low 4% range may be a bit of a false indicator.

By sector, Healthcare brought in +55K new jobs last month — far and away the strongest industry for jobs currently. Social assistance gathered +18K. Manufacturing, on the other hand, spent its third straight month in negative territory, -37K, and the Federal Government has cut payrolls by -12K. Since President Trump has taken office in this term, the federal government workforce has shed -84K jobs.
 

Pre-Markets, Bond Yields Down; Fed Cut Probability Way Up

The timing of this jobs report in relation to the latest Fed meeting could have been better. When the Fed decided on Wednesday not to cut interest rates from their current +4.25-4.50% level, it was with the understanding the labor market had created +258K more jobs than we currently recognize. There is no Fed meeting in August — only an emergency meeting to cut rates would beget relief on interest rates before the next scheduled meeting in mid-September.

Depending on how the labor market performs over the next month and a half — not to mention what we see from the Inflation Rate and PCE reports (+2.7% and +2.6%, respectively, higher than previous months) — we may see a 25 bps or even a 50 bps rate cut come September. The likelihood of a cut ramped way up this morning, from around +34% ahead of the jobs report to +87% now.

The bond market has taken notice: the 10-year bond yield has fallen to +4.27%, more than half a percentage point since earlier this morning, and similarly on the 2-year, now +3.79%. Meanwhile, pre-market trading has sent major indexes into the red: the Dow is -330 points at this hour, the S&P 500 is -53 and the Nasdaq -220.

Q2 Earnings Friday Morning, at a Glance: XOM, CL & More

ExxonMobil XOM posted mixed results in its Q2 report ahead of today’s opening bell. Earnings of $1.64 per share outshined the $1.49 analysts were expecting, for a +10% positive earnings surprise. Revenues, however, came in -1.59% below estimates. Oil supermajor rival Chevron CVX also beat earnings expectations, by +4% to $1.77 per share.

Colgate-Palmolive CL posted a 3-cent beat to 92 cents per share in its Q2 earnings report this morning, while beating on the top line by +1.17%. Dupixent maker Regeneron REGN had perhaps the biggest earnings beat of the morning, +60.5% to $12.89 per share in the quarter.

What to Expect from the Stock Market Today

We’re not done with economic reports this Friday. S&P Manufacturing PMI for July is predicted to inch up month over month to 49.9 from 49.5 previously. This would bring this metric just to the precipice of growth, which is the 50 level. ISM Manufacturing, also for July, is expected to rise to 49.5% from 49.0% reported a month ago.

Construction Spending for June, Auto Sales for July and the final Consumer Sentiment print for July all come out after the regular trading day starts, as well. Construction spending is expected to improve but still show a negative -0.1%, while Consumer Sentiment is projected to meet the prior read of 61.8 — a good number.

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