Key facts
- The U.S. economy lost 23,000 jobs in July.
- U.S. nonfarm payrolls missed forecasts of an 80,000 gain.
- May and June U.S. payroll figures were revised down by a combined 103,000.
- The U.S. unemployment rate was reported as 4.3%, 4.1%, or steady at 4.1%.
- Canada added 75,100 jobs in July.
- Canada's unemployment rate fell to 6.4%, a two-year low.
- U.S. stock futures advanced following the jobs report.
- The S&P 500 closed at a record high.
- The U.S. dollar experienced a sharp intraday fall.
- The Japanese yen surged against the dollar.
- Average hourly earnings in the U.S. rose 3.2% year-over-year.
The U.S. labor market unexpectedly lost momentum in July, shedding 23,000 jobs, a significant miss from economists' forecasts of an 80,000 gain. This decline in nonfarm payrolls was accompanied by downward revisions to job creation figures for May and June, totaling a combined 103,000 fewer positions. The unemployment rate saw conflicting reports, with some sources stating it rose to 4.3% and others indicating it fell to 4.1% or held steady at 4.1%. One report noted that labor force participation hit a 5-1/2-year low.
This weaker-than-expected U.S. jobs data has had a notable impact on financial markets. Expectations for a Federal Reserve interest rate hike in September have been significantly reduced, with futures markets now indicating a lower probability of such an increase. Some speculation has emerged that the Fed might even pivot towards cutting interest rates, despite previous hawkish guidance. Consequently, the U.S. dollar experienced its sharpest intraday fall in over a year, losing ground against currencies like the Japanese yen, which surged. Conversely, U.S. stocks advanced, with the S&P 500 closing at a record high and major indexes posting their largest weekly gains since mid-April. U.S. stock futures also rose.
In contrast to the U.S. figures, Canada's economy demonstrated resilience, adding 75,100 jobs in July, significantly exceeding expectations. This surge in employment led to a decrease in Canada's unemployment rate to 6.4%, its lowest point in two years. Meanwhile, global markets had been holding steady ahead of the U.S. jobs report, with oil prices seeing a notable increase. Uncertainty surrounding a potential Iran peace deal also bolstered the dollar's safe-haven appeal prior to the jobs data release.
Economists remain divided on the year-end outlook for interest rates, despite the market's reaction to the July jobs report. Average hourly earnings in the U.S. rose 3.2% year-over-year.