Job Report for July Reignites Expectations of Interest Rate Reduction: Insights from Industry Experts
In a surprising turn of events, the July jobs report showed a significant slowdown in the labor market, with only 73,000 payroll gains, far below the expected 100,000 new jobs [1][3]. This disappointing figure, coupled with substantial downward revisions of 125,000 and 133,000 jobs for May and June respectively, has lowered the three-month moving average of job growth to around 35,000 – a cycle low consistent with recessionary periods.
Alexandra Wilson-Elizondo, Global Co-CIO of Multi-Asset Solutions at Goldman Sachs Asset Management, expressed concerns over the cooling labor market and the underlying deterioration [2]. Similarly, Jason Pride, Chief of Investment Strategy and Research at Glenmede, believes each soft labor market report strengthens the case for the 1-2 rate cuts priced into markets this year [2].
The weak job numbers have raised doubts about the resilience of the labor market, leading to growing expectations of greater Federal Reserve accommodation. As a result, the probability that the Fed will cut interest rates as soon as September 2025 to support the economy has increased [1][3].
Before these revisions, the Fed had paused rate hikes and was seen as cautious about cutting rates. However, the weak job numbers make a September rate cut more likely as the Fed aims to preempt a downturn [1][3].
Jeffrey Roach, Chief Economist for LPL Financial, and Jeff Schulze, Head of Economic and Market Strategy at ClearBridge Investments, believe the July jobs report indicates a slowdown in the labor market and supports a September rate cut by the Federal Reserve [2]. Ellen Zentner, Chief Economic Strategist for Morgan Stanley Wealth Management, suggests that the Fed may see a clearer path to a September rate cut if data over the next month confirms the trend [2].
Futures traders have responded to this morning's data, with odds that the Fed lowers the federal funds rate by a quarter-percentage point at its next meeting in September jumping to 76% [2]. On the other hand, Chris Zaccarelli, chief investment officer for Northlight Asset Management, expects the stock market to "move past this particular report and keep climbing this month" [2].
Job gains in July were seen in health care (+55,000) and social assistance (+18,000) [1]. Scott Wren, Senior Global Market Strategist at Wells Fargo Investment Institute, believes the labor market is likely to decelerate in the coming months and the unemployment rate may move higher by the end of the year [2].
Sources:
[1] CNBC. (2025, August 6). U.S. adds just 73,000 jobs in July, far below expectations, as unemployment rate rises to 4.2%. Retrieved August 6, 2025, from https://www.cnbc.com/2025/08/06/us-jobs-report-july-2025.html
[2] Reuters. (2025, August 6). Markets Live: U.S. July jobs report disappoints, odds for September rate cut jump. Retrieved August 6, 2025, from https://www.reuters.com/markets/us/markets-live-us-july-jobs-report-disappoints-odds-for-september-rate-cut-jump-2025-08-06/
[3] Bloomberg. (2025, August 6). U.S. Jobs Report: July Payrolls Growth Misses Estimates, Unemployment Rate Ticks Up. Retrieved August 6, 2025, from https://www.bloombergquint.com/onweb/us-jobs-report-july-payrolls-growth-misses-estimates-unemployment-rate-ticks-up
- The weak job numbers and subsequent revisions have prompted concerns within the finance sector, with experts like Alexandra Wilson-Elizondo and Jason Pride predicting that the Federal Reserve might be prompted to lower interest rates due to the deteriorating labor market.
- In light of the disappointing July jobs report, the business community is growing increasingly anticipatory of greater Federal Reserve accommodation, as evidenced by the 76% probability of a September rate cut according to futures traders.
