US Economy Loses 23,000 Jobs, Gold Jumps 3%: What Do Prediction Markets Say About Rate Hikes?
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Gold futures jumped roughly 3% to around $4,400 on Friday after the U.S. economy lost 23,000 jobs in July—a shock miss against expectations for a gain of 83,000 that sent bets on another Federal Reserve rate hike tumbling.
The report was even weaker under the hood.
Revisions erased another 103,000 jobs from May and June, leaving average monthly job growth near just 20,000 over the past three months.
Wage growth remained solid but showed no sign of accelerating, with average hourly earnings up 0.1% in July and 3.2% from a year earlier.
Why Did Unemployment Fall?
Despite the job losses, the unemployment rate fell to 4.1% from 4.2%, its lowest level in two years.
That happened not because more people found jobs, but because fewer were looking: labor force participation dropped to 61.4%, its lowest since 2021.
Fed watcher Nick Timiraos noted that both the number of people looking for work and the number counted as unemployed fell. Lower immigration has also reduced the number of new jobs the economy needs each month to keep unemployment steady, with some estimates as low as 20,000 to 50,000.
Bloomberg’s Joe Weisenthal pointed out that the foreign-born labor force has fallen by roughly half a million over the past year.
The headline decline was also driven heavily by government jobs.
Local government employment fell by roughly 50,000, largely in education, an unusually large drop that Janney’s Guy LeBas said “seems ripe for upward revision.”
Private employers added 30,000 jobs in July, with private payroll growth averaging about 40,000 a month over the past three months. That is subdued by historical standards, though potentially closer to the pace needed as labor-force growth slows.
Fed Rate Hike Bets Crumble
The Fed held rates at 3.50%-3.75% last month, with three officials voting for a hike and Chair Kevin Warsh leaving future moves dependent on incoming data.
Interest-rate futures cut September hike odds from 57% immediately before the report to 43.9% afterward, according to Reuters.
On Polymarket, traders subsequently pushed the odds of a hike in September down to around 34%, from 48% yesterday. The odds of a cut are still below 2%.
Why Gold Jumped 3%
Weak jobs data pushed the 10-year Treasury yield down toward 4.62% and the dollar 0.4% lower. Both help gold, which pays no yield and gets cheaper for foreign buyers when the dollar falls. The metal was already rallying before the report, which accelerated the move.