Weak Jobs Data Ahead of Friday’s Nonfarm Payrolls Print

Soft jobs data pushes yields lower. UST yields rose ~2 bps this morning but quickly declined to intraday lows after US job openings came in ~200k below expectations. The weak labor data fueled bets for 2025 rate cuts, and Fed Funds futures now have a September move priced in as 95% likely. The 2-year yield closed 2 bps lower at 3.62% while the 10-year yield and 30-year yield closed 4-6 bps lower at 4.22% and 4.90%, respectively. Meanwhile, Google hit a new all-time high of $231.80 per share after an antitrust ruling stated it will not need to sell Chrome, and the tech-heavy NASDAQ rose 1.02% to nearly 21,500.

JOLTS data reinforces labor market concerns. US job openings came in at 7.18 million in July, the lowest level in 10 months and below June’s downward revision of 7.36 million. The decline was largely due to slowed hiring in the health care sector, notable for an industry often less sensitive to economic cycles which has helped sustain positive US job growth. However, job vacancies per unemployed worker, one of the Fed’s favorite gauges of labor supply and demand, held steady at 1:1, near the lowest level since 2021 and against a 2022 peak of 2:1. Overall, July’s job vacancy decline was largely attributed to tariff uncertainty, though it remains to be seen how hiring attitudes changed in August on the back of recent trade deals and persistent inflation concerns. The JOLTS data comes ahead of Friday’s nonfarm payroll release, which is expected to show modest job growth and a slight uptick in the unemployment rate.

Fed officials at a crossroads. Today, St. Louis Fed President Musalem (voter) shared that employment risks are becoming a greater concern than inflationary risks, a shift from his previously hawkish stance. Similarly, Fed Governor Waller (voter) on CNBC this morning suggested that the FOMC should lower interest rates this month, ahead of additional rate cuts in the coming months. He acknowledged that his view is not widely shared across the committee, noting, “…people are still worried about tariff inflation. I’m not, but everybody else is.” That group includes Atlanta Fed President Bostic and Minneapolis Fed President Kashkari (non-voters). In an essay published today, Bostic reiterated his support for only one rate cut for the remainder of the year. Kashkari, for his part, voiced concern about the current challenge the Fed faces in balancing its dual mandate, especially given his beliefs on the inflationary impact of tariffs.