Employment Data - July non-farm payrolls increased by only 73,000, significantly below expectations, with prior months' data revised down by a total of 258,000[12] - The unemployment rate rose slightly to 4.2%, indicating a still robust labor market, but declining labor force participation suggests a weakening supply-demand balance due to reduced immigrant labor[12] Market Reaction - The disappointing employment data led to a sharp decline in the US dollar index and US stocks, with markets betting on potential interest rate cuts by the Federal Reserve in September, October, and December[3] - Historical patterns suggest that US stocks may experience seasonal weakness in Q3, but strong earnings and guidance from tech stocks like META provide support for future gains[3] Federal Reserve Outlook - The Federal Reserve is expected to initiate rate cuts in September, with the current interest rate maintained at 4.25%-4.50%[12] - Fed officials expressed concerns about inflation and labor market conditions, with some advocating for a 25 basis point cut due to economic slowdown and stable inflation expectations[33][34] Risks - There is a risk of inflation rising above expectations, which could delay the pace of rate cuts by the Federal Reserve[4][39]