Goldman Sachs, JPMorgan: Weak July Jobs Data Supports Fed Pause on Rate Hikes
Miles Bennett
U.S. nonfarm payrolls fell by 23,000 in July, far below the 80,000 gain economists expected; Goldman Sachs and JPMorgan both said the weakness supports a Fed pause on rate hikes — but next week's CPI will decide how long that consensus holds.
How bad was the jobs report?
July nonfarm payrolls fell 23,000 versus an expected gain of 80,000 — not just a miss, but a contraction. May and June figures were revised down by a combined 103,000. This means → the labor market over the past three months was materially weaker than previously understood.
Market-implied odds of a September rate hike dropped from roughly 55%–60% to about 40% within hours of the release.
The two-year Treasury yield fell 0.09 percentage points to 4.16%, its lowest since mid-July. In plain terms = the bond market is already pricing in a pause.
What are the big banks saying?
Goldman Sachs chief economist Jan Hatzius called the report "soft overall" and said Goldman's composite employment-growth tracker is slowing.
JPMorgan chief global strategist David Kelly said the weak data support holding rates steady, adding that inflation has become the core driver of the Fed's policy path.
Commerzbank senior economist Bernd Weidensteiner described the report as "cold water." AllianceBernstein head of developed-market economics Eric Winograd said the data "do weaken the case for a hike" — without ruling one out entirely.
What actually drove the job losses?
The biggest drag was education: local-government education payrolls fell by roughly 50,000 in a single month. Omair Sharif of Inflation Insights noted the drop likely reflects seasonal-adjustment distortions from summer school closures, not a genuine collapse in demand.
Retail shed 19,000 jobs; financial services lost 14,000. But hiring in healthcare, construction, social assistance, and manufacturing kept the private sector in positive territory with a net gain of 30,000.
In plain terms = much of the headline weakness is seasonal noise from education; the private sector did not fall apart.
Why isn't a lower unemployment rate good news?
The unemployment rate dipped from 4.2% to 4.1% — on the surface, an improvement. But it fell because more workers left the labor force, not because more jobs appeared. The participation rate dropped to its lowest since 2021.
ING chief international economist James Knightley estimated that if participation had held steady, unemployment would be above 5%. This means → the headline improvement masks a genuine cooling of the labor market.
Wage growth slowed in tandem. This reflects weakening demand for workers and shrinking employer pricing power.
What comes next?
Multiple analysts stressed that next week's July CPI will matter more for the Fed's path than this jobs report. Nomura U.S. rates strategy head Jonathan Cohn put it plainly: "If the inflation print runs hot, the pressure snaps right back onto the Fed. Inflation is the more important side of the dual mandate right now."
ADP's private-payroll data corroborated the picture: July private employment rose only about 44,000, more than halving the prior month's gain.
Before the September meeting, the market will see one more payrolls report and two CPI prints. In plain terms = the jobs data gave the Fed a reason to pause — but an inflation surprise could take that reason away overnight.
Content is for reference only, not financial advice.