July 2025 Employment Report

The U.S. economy added 73,000 jobs in July, according to the Bureau of Labor Statistics (BLS) survey of employers. The increase was below consensus expectations for a gain of 104,000. The prior two months were revised substantially downward by a cumulative 258,000. Employment “continued to trend up in health care and in social assistance. Federal government continued to lose jobs”, according to BLS. The number employed in manufacturing dropped to the lowest in more than three years. Over the last three months, payrolls have advanced at a monthly average of just 35,000 — the slowest trend since the pandemic.

The BLS’s survey of households reported the unemployment rate at 4.2% in July, up from 4.1% in June. The household survey showed monthly declines in both the number employed and in the labor force. However, the overall unemployment rate has been stable between 4.0% and 4.2% since May 2024. Average hourly earnings — a proxy for wage growth — rose 0.3% for the month and 3.9% vs. a year ago. Both figures met consensus estimates.

Bottom line

This is an unambiguously soft reading on the state of the U.S. job market. The payroll survey shows a near stall in job growth in recent months, while the household survey indicates declines in both employment and the size of the labor force — a sub-optimal way to keep the unemployment rate low. Market reaction has been swift and decisive. As of 9 am Eastern time, futures were pricing in an 83% chance of a Fed rate cut in September and the 10-year Treasury yield had dropped by 13 basis points to 4.26%. Equity futures were down about 1%, though that was the case prior to release of the jobs report and driven by overnight tariff news.