The good employment data was a “lie”... Recession expected, large rate cuts anticipated, plus “August was originally weak”
Hello to all investors!
July's employment report has significantly changed Wall Street's outlook. The notion that the labor market remains strong is an illusion, and expectations of a recession have begun to re-emerge. Furthermore, President Trump announced high reciprocal tariff rates against various countries late at night. Confidence in a bull market was shaken, and the New York market on August 1st experienced a sharp decline. As August, often considered seasonally weak, begins, have adjustments started?
August 1 (Friday) New York Market Major Indices
DJIA:43,588.58 (-1.23%)
S&P 500:6,238.01 (-1.60%)
NASDAQ:20,650.13 (-2.24%)
RUS 2K:2,166.78 (-2.03%)
US 10-YR:4.216% (-0.144)
US 2-YR:3.68% (-0.271)
OIL:67.26 (-2.00, -2.89%)
GOLD:3,416.00 (+67.40, +2.01%)
1. The Vanished 2,580,000 Jobs
At 8:30 a.m., the U.S. July nonfarm payrolls were announced. They rose by 730,000, which was lower than Wall Street’s expectation of around 100,000.But still.
The issue wasn’t just that. The chaos stemmed from large revisions to data for May and June over the past two months. May employment was revised down from the traditional 144,000 to19,000. June employment was revised down from the traditional 147,000 to14,000. The total number of jobs that likely existed in March–June of the past two months but were actually erased reached2,580,000. Such a large two-month revision is the largest since 1979, except for the pandemic’s early days in April 2020.
Before today’s data release, the three-month average of job gains was 150,000 per month. However, due to July’s weaker-than-expected figure and the two months of significant downward revisions, the three-month average of employment rose to35,000 per month. The traditional narrative that the labor market remains healthy has collapsed.
