US July Nonfarm Payrolls Lower Than Expected, Unemployment Rate Ticks Up to 4.2%

The US Bureau of Labor Statistics released July nonfarm payrolls data, showing a lower-than-expected increase of 73,000 jobs compared to the consensus of 110,000 and a revised prior of 14,000. The unemployment rate ticked up to 4.2%, matching the consensus and prior rate of 4.1%.

The US Bureau of Labor Statistics (BLS) released the July Nonfarm Payrolls data, revealing a lower-than-expected increase in jobs. The report showed an addition of 73,000 jobs, falling short of the consensus forecast of 110,000 and the revised prior figure of 14,000. The unemployment rate remained unchanged at 4.2%, matching the consensus and prior rate of 4.1% [1].

This data suggests a cooling in the US labor market, with job growth slowing down after a robust first half of the year. The July jobs report, scheduled for release on Friday, is expected to show an addition of 110,000 new jobs, a significant decrease from the 147,000 jobs added in June. The unemployment rate is also expected to rise slightly from 4.1% to 4.2%, and average hourly earnings are projected to increase by 0.3%, higher than June's 0.2% [2].

The Federal Reserve (Fed) has been closely monitoring these developments. Despite the strong performance of the US job market in the first half of the year, there are increasing concerns about a potential slowdown in job growth. The Fed's preferred inflation gauge, the Personal Consumption Expenditures (PCE) price index, came in a touch hotter than expected in July, raising concerns about inflation [2].

The USD remains strong ahead of the NFP release, with the EUR/USD pair trading near the 1.1400 threshold. Generally speaking, a solid NFP report showing higher-than-anticipated job creation and a steady unemployment rate should boost demand for the American currency, not only because of the good news, but also because it reinforces the Fed’s wait-and-see stance. The opposite scenario is also valid, with a disappointing headline coupled with a higher-than-anticipated Unemployment Rate weighing on the Greenback [1].

Valeria Bednarik, FXStreet Chief Analyst, says: “The EUR/USD pair trades at its lowest in over a month, shedding roughly 400 pips from its July peak at 1.1830. The USD advance was a long-overdue correction, as the Dollar Index fell for five consecutive months before turning the tide in July. With that in mind, EUR/USD may well pierce the 1.1400 level on a strong NFP report, and extend its slide towards the 1.1340 region, where it set a monthly low in June. Additional slides could result in a fall towards the 1.1280 area” [1].

References:
[1] https://www.fxstreet.com/news/nonfarm-payrolls-set-to-show-hiring-moderated-in-july-as-us-labor-market-cools-202508010500
[2] https://seekingalpha.com/news/4476512-nonfarm-payrolls-lower-than-expected-in-july-unemployment-rate-ticks-up-to-42