07.08.2026 - Bad Jobs Data=Good News?
The latest US labor market data delivered a significant downside surprise this afternoon.
US nonfarm payrolls unexpectedly fell by 23’000 in July, compared with expectations for an increase of around 80’000. June was revised down to a loss of 20’000 jobs, while May was revised lower to just 63’000.
The revisions are particularly noteworthy. Over the past 12 months, the US economy has now added an average of just 34’000 jobs per month, pointing to a clear slowdown in the labor market.
At the same time, the unemployment rate edged lower to 4.1%. However, this was accompanied by another decline in the labor force participation rate to 61.4%, its lowest level in more than five years.
US stock futures moved higher as investors interpreted weaker employment data as reducing the probability of a Fed rate hike.
Markets:
Equities: US Futures jump +1% together with global indices
Bonds: only slightly lower on the longer end - US 10y yield above 4.63%, Japan 10y yield 2.80%
Commodities: Oil prices slightly higher, WTI around USD 76/barrel and Brent around USD 81/barrel
Precious metals prices rally, gold above USD 4’350/oz (+2.6%), silver trades above USD 64/oz (+4%)
Currencies: US dollar is falling, Japanese Yen stronger at USDJPY 157
Cryptos: gained - Bitcoin back above USD 65k
Volatility: The VIX index remains low at 15 (good hedging level)
My View: Inflation remains the Fed's bigger concern at the moment. The Fed itself has made clear that bringing inflation back toward its 2% target remains the priority.
Yet markets are currently paying much more attention to the labor market.
Why? Because investors are hoping for bad job data.
A weakening labor market increases the probability that the Fed will step away from a potential rate hike. That explains today's initial market reaction: jobs disappoint, yet stock futures move higher.
Once again, bad economic news is being interpreted as good news for markets.
But there is another side to the story.
If the labor market continues to deteriorate while inflation remains elevated, the Fed could increasingly find itself caught between two problems: persistent inflation on one side and a weakening economy on the other.
Today's report may reduce expectations for another rate hike, but a US economy that is starting to lose jobs in combination with sings of slowing in the last quarter, with yields remaining elevated, corporates on high debt levels, this hardly good news in itself.
For now, markets are celebrating the prospect of fewer rate hikes. Let's see whether this short-term relief lasts, or whether investors eventually turn the coin and start focusing on what weaker job data actually says about the underlying economy.
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