Wall Street sees July jobs report easing pressure on Fed rate hikes as equities rise
The July labor market report showed a modest job loss and a lower unemployment rate, prompting expectations that the Federal Reserve may pause rate hikes, while U.S. stocks posted weekly gains.
The Labor Department said the U.S. economy shed 23,000 jobs in July, far below analysts' expectations, and the unemployment rate slipped to 4.1% as labor-force participation fell to a near-pandemic low. The three-month average of job gains dropped to about 20,000, and the six-month average fell to roughly 44,000, indicating a slowdown in hiring momentum.
"The report suggests that the economy is seemingly slipping back toward the 'no hire, no fire' narrative that characterized the labor market through much of 2025," said Jim Baird, chief investment officer at Plante Moran Financial Advisors.
"There were many moving parts, but very little to like about this report. If the job market falters, consumers and the economy might not be far behind," said Russell Price, chief economist at Ameriprise.
Treasury yields declined after the data, reversing earlier gains that had reflected concerns about the Fed lagging behind inflation. Market strategists noted that the weaker employment numbers could give the Federal Reserve justification to keep rates steady, especially as wage growth came in softer than forecast.
"To the point of the wage inflation, I think this really solidifies our view that the Fed is going to stay on hold this year," said Leslie Falconio of UBS.
Implied odds of a September rate hike fell, according to a market-based betting platform, reducing the perceived risk of higher borrowing costs for investors. U.S. equities rose, with the Dow Jones, S&P 500 and Nasdaq all posting weekly gains. Large-cap technology shares led the rally, as Nvidia jumped 10% for the week and Microsoft and Meta rose 8% and 7% respectively.
"In terms of what this does to the stock market, it's probably positive in that it reduces the probability of a rate hike in September," said Amber Fairbanks, portfolio manager at Impax Asset Management. She added that while AI remains an attractive theme, investors should be selective about the companies that truly benefit from the technology.