July payrolls fall by 23,000 as prior months get revised down again
Friday’s July jobs report was a rough one. Payrolls fell by 23,000 jobs, the second straight downside surprise after June’s disappointing print (and a sign that prediction markets calling for a cooler number may be worth monitoring for analysts and investors). Unemployment meanwhile beat expectations, ticking down to 4.1% in line with the Chicago Fed forecast, but that headline drop might be masking an underlying slowdown: labor force participation actually fell 0.1 percentage points. Wage growth was weak as well, up just 3.2% year over year, below the expected 3.5%. And May and June payrolls were revised down by a combined 103,000, only compounding last month’s disappointing numbers.
A rough jobs report complicates the Fed’s calculus, but inflation remains key
A print like this complicates the Fed’s calculus, if only at the margin. CME’s FedWatch tool, which had priced in a 55% chance of a hike before the report, flipped to a 54% chance of a hold in the minutes after. However, today’s job print likely just pushes out the timeline on rate hikes rather than bolstering the case for cuts. Inflation remains the key indicator for the Fed and the bond market, and by extension for housing. And next week’s CPI inflation print will also serve to put today’s weak wage growth number in context for consumers.
Housing holds steadier than the labor market, despite some cracks
Housing had a calmer July than the labor market, though there were some signs of a summer slowdown as well. The Realtor.com July housing report showed a market on cruise control, even against the headwinds of rising mid-to-late-summer mortgage rates and renewed economic uncertainty. Sellers kept pricing more realistically, pending sales continued to beat last year’s pace (though that lead is narrowing), and homes spent a day less on market than they did a year ago. Friday’s messy jobs print doesn’t change that story, but it does underscore that labor market momentum, on average, isn’t providing any outsized added support to housing demand right now.
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