The US jobs report for July 2025 showed a rise in non-farm payrolls by 73,000, noticeably below the 110,000 estimate. Significant revisions included the prior month’s figure adjusted from 147,000 to 14,000, with a total monthly payroll revision of -258,000. Private payrolls increased by 83,000 against an estimate of 100,000, with a prior revision to 3,000. Manufacturing payrolls decreased by 11,000, compared to an estimated decline of 3,000, while the previous month was revised to -15,000. Government payrolls decreased by 10,000 after an earlier revision of 73,000 to 11,000. The unemployment rate stood at 4.2%.
Average earnings rose 0.3% month-on-month and 3.9% year-on-year, meeting expectations. The average workweek hours were 34.3, slightly above the estimate. The labour force participation rate was 62.2%, with underemployment at 7.9%, up from 7.7%. Following the report, US stocks, such as the S&P and Nasdaq, showed declines, while yields and the USD also fell. The S&P decreased by 53 points and the Nasdaq by 243 points. The probability of a rate cut in September and December stood at 75% and 72%, respectively, following the weaker data.
Impact Of Job Report Revisions
The jobs report we saw today is a game-changer, but not because of the headline number. The massive downward revision of last month’s data from 147,000 to just 14,000 jobs is the real story. This single revision paints a much darker picture of the economy than we understood just yesterday.
With Fed Chair Powell just saying he needed two months of data for the September meeting, this report effectively delivered that in one go. Given that the last inflation report in July showed CPI cooling to 2.8%, the Fed now has a clear signal to act. The market agrees, pricing in a 75% chance of a rate cut at the September 17 meeting.
We are seeing the 2-year Treasury yield plummet, dropping over 16 basis points to 3.788%. This is a strong signal to favor trades that benefit from lower interest rates. Consider long positions in interest rate futures or buying call options on Treasury bond ETFs in the coming weeks.
Reaction Of Stocks And The US Dollar
The stock market’s immediate drop shows concern over a potential recession, which this data now makes more plausible. We expect volatility to rise significantly ahead of the Fed’s September decision, as the VIX has already surged over 30% today to trade above 19. Buying puts on indices like the S&P 500 or Nasdaq 100 can serve as a valuable hedge against further economic bad news.
A weaker US dollar is the logical outcome, as lower interest rates reduce its appeal to foreign investors. This trend is likely to continue as the market solidifies its bets on a Fed rate cut. Shorting the dollar against currencies like the euro or yen is a direct way to position for this.
We have seen this before, particularly looking back at the period leading into 2008. Significant downward revisions to payroll numbers were a key early indicator that the labor market was weaker than reported. This history suggests we should take today’s revisions as a serious warning sign of a sharp economic slowdown.
The details of the report show the weakness is widespread, with manufacturing and professional services shedding jobs. Outside of the resilient healthcare sector, the private sector is sputtering, which aligns with recent data showing retail sales have fallen for three straight months. This confirms the US consumer, the engine of the economy, is finally running out of steam.
