U.S. Employment (July 2025)
Thomas Feltmate, Director & Senior Economist | 416-944-5730
Date Published: August 1, 2025
- Category:
- U.S.
- Data Commentary
- Labor
No fireworks in July's employment report!
- Non-farm employment increased by 73k in July, well below the Bloomberg consensus of 105k. Job gains for the prior two months were revised lower by a substantial 258k jobs.
- Over the past three months, non-farm payrolls gained an average of 35k jobs, well below the twelve-month average of 128k.
- Private payrolls rose 83k – up from the only 3k reported in June – with most of the gains concentrated in health care & social assistance (+73.3k). Federal payrolls fell by 10k, while state & local added 2k jobs.
- In the household survey, civilian employment (-260k) fell sharply, while the labor force (-38k) declined only slightly, pushing the unemployment rate higher by 0.1 percentage points to 4.2%. Meanwhile, the labor force participation rate slipped to 62.2% – its lowest level since November 2022.
- Average hourly earnings (AHE) were up 0.3% month-on-month (m/m) – a tick stronger than June's gain. On a twelve-month basis, AHE were up 3.9% (from 3.8% in June).
- Aggregate weekly hours rose 0.3% m/m after declining 0.3% m/m the month prior. Over the last three-months, aggregate hours have been largely flat.
Key Implications
- Wow! How quickly things can change! Not only did payrolls come in well below expectations, but revisions to May and June were meaningfully lower, resulting in an average pace of payroll gains that's running well below what's required to hold the unemployment rate steady. Elsewhere in the report, there were plenty of other signs of weakness. The duration of unemployment rose to its highest level since early-2022, while the broader measure of unemployment also ticked higher by two-tenths, reaching a four-month high of 7.9%. Meanwhile, the breadth of hiring across private industries – while having ticked modestly higher – remains well below what's typically seen in a more "balanced" labor market.
- Stability in the labor market has been a major factor keeping the Fed on the sidelines through this year. But with that narrative now shattered, and two voting members already advocating for rate cuts, the prospect of a September cut is looking increasingly likely. Following this morning's release, Fed futures have priced in an 80% probability of a September cut, up from the near coin toss priced prior to this morning's release.
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