Odaily Planet Daily report: U.S. non-farm payroll data for July unexpectedly decreased by 23,000, far below market expectations. Although seasonal factors and the fading World Cup boost disrupted the data, this significantly weakened the Fed’s momentum for a September rate hike, shifting market focus to next week’s CPI.
Although the surface data appears dismal, the unemployment rate unexpectedly fell to 4.1%. This seemingly contradictory phenomenon is due to a cumulative decline of 0.7 percentage points in the labor force participation rate since the beginning of the year.
Analysts are divided in their interpretation of this "poor" report. Thomas Ryan, Senior Economist at Capital Economics, bluntly stated that although the current weakness has not yet been reflected in broader indicators, it is sufficient to prompt Federal Reserve officials to reassess the health of the labor market and reduce their willingness to further tighten monetary policy in the near term.
Facing a report described by Adam Crisafulli, founder of Vital Knowledge, as “extremely scary,” capital markets displayed their typical contrarian logic. As traders bet that the rate-hiking cycle has ended, U.S. stock futures surged and Treasury yields fell across the board. According to CME tools, the market’s implied probability of a September rate hike has quickly dropped from 55% on Thursday to 44%. (Tradersunion)