
US Chart of the Day: Payrolls Report - July 2025
Winnie Cisar - Global Head of Strategy, CreditSights
Zachary Griffiths, CFA - Head of IG & Macro Strategy, CreditSights
Logan Miller - Head of European Strategy, CreditSights
Brian Perez - Analyst, Credit Strategy, CreditSights
Kathleen Tang - Analyst, Strategy, CreditSights
1 August 2025
Insights into July 2025 US Labor Market Trends and Economic Drivers, including:
- Comprehensive Breakdown of the July 2025 Payrolls Report: Get the key numbers from the latest nonfarm payrolls release, including the scale of downward revisions and how the data compares to expectations.
- Fed Rate Cut Expectations in Focus: See how new jobs data and labor market trends are shaping market expectations for Federal Reserve policy action and the potential timing of rate cuts.
- Labor Market Shifts and Sector Insights: Uncover which sectors contributed most to job gains and losses, and how changes in labor force participation and unemployment rates are influencing the broader economic picture.
- Market Reactions to Surprising Payroll Data: Learn how fixed income and equity markets are responding to the report, including shifts in Treasury yields and investor sentiment.
- Context on Tariffs, Wages, and Economic Outlook: Understand the implications of recent tariff announcements, wage growth trends, and what these factors may signal for future economic conditions and monetary policy.
Executive Summary
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The most important detail of the July nonfarm payrolls report is -258k net revisions to the prior two months of data. Add on top of that a downside surprise on the July figure itself (73k vs 104k consensus) and Treasury yields are off to the races lower with risk sentiment taking a hit.
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Today’s report pushes the 3m moving average of job gains to just 35k, the lowest since the 2010s ex-Covid.
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Labor supply continues to fall with the labor force dropping 38k pushing the labor force participation rate to 62.2%. That kept the unemployment rate from rising more, with a modest tick up to 4.2% as expected. Average hourly earnings also modestly surprised to the upside, bringing the 3M annualized pace to over 4.0% and the highest level since November 2024.
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We now expect the Fed to cut 50 bp in September.
The 3m moving average of job gains has fallen from 323k in December 2024 to just 35k as of July following major downward revisions. That is the slowest 3m pace of job gains since the early 2010s (ex-Covid, chart below). Job adds for July were just 73k, below the 104k consensus expectation. Data over the prior two months were revised down by 258k in aggregate, making the revised June and May prints 14k and 19k, respectively. In our Fed preview piece we noted “Given the Fed’s history of policy adjustments in response to labor market data, we would be inclined to change our view if payrolls fall below 100k job adds in two consecutive months or in a single month of sub-50k (or negative) job adds (absent weather-related disruptions like last year’s post-hurricane report).” Today’s print makes the recent labor market trend even worse than what we envisioned would trigger a near term rate cut by the Fed. Given Chairman Powell’s assessment that policy is currently in modestly restrictive territory, and the two dissents on the Fed Board, we think the Fed is more likely to go big with the next cut than ease into gradual rate cutting from current levels.