Employment Data - In July, the U.S. added only 73,000 non-farm jobs, significantly lower than expected, with previous months' job additions revised down to 19,000 and 14,000 for May and June respectively, indicating a downward adjustment of 86,000 jobs[3] - The average unemployment rate increased by 0.1 percentage points to 4.2% in July, reversing a slight decline in June[3] Labor Market Dynamics - The labor force participation rate fell for the third consecutive month, down 0.1 percentage points to 62.2%, the lowest since December 2022, reflecting a decrease in potential labor supply due to strict immigration controls[4] - Average hourly earnings rose by 0.1 percentage points to 3.9% year-on-year, following three months of stagnation, indicating upward pressure on wages[4] Economic Implications - The labor market's current cooling trend is expected to be temporary, with potential recovery as fiscal expansion measures are implemented, which may lead to increased job creation and higher incomes[4] - The "Big and Beautiful Act" is anticipated to provide significant tax incentives for domestic investment, potentially leading to a rebound in the labor market and upward pressure on inflation[4] Market Reactions - Following the employment data release, the U.S. dollar index fell sharply by 1.38% to 98.69, reflecting market concerns over the labor market's performance[3] - The overall structure of job additions in July suggests a prolonged process for the return of advanced industry chains to the U.S., with tariffs having a notable impact on domestic manufacturing[3]

Monetary Policy Insights - The Federal Reserve maintained the federal funds rate at 4.25%-4.5% for the fifth consecutive time in 2025[3] - Powell did not indicate a rate cut in September, emphasizing that inflation remains above target while employment is at target levels[3] - The assessment of economic activity was downgraded from "continuing to expand at a steady pace" to "economic growth has slowed in the first half of the year"[3] Inflation and Tariff Impact - Powell noted that the inflation caused by tariffs is still in its early stages, with evidence showing that exporters are not absorbing the costs, but rather businesses and retailers are[4] - The potential for inflation to rise due to tariffs is being closely monitored, indicating a cautious approach to future rate cuts[4] Labor Market Dynamics - The labor market is described as robust, with recent data showing a decline in weekly initial jobless claims to a 14-week low[5] - The "Big and Beautiful" plan is expected to stimulate both supply and demand in the economy, potentially leading to a tighter labor market and upward pressure on wages and inflation[5] Economic Outlook - The combination of tax cuts and tariff agreements is likely to support economic growth and limit the Fed's ability to implement significant rate cuts in the near term[5] - The recent tax cuts include substantial individual tax reductions for middle and upper-income groups, which are expected to boost consumer spending[5] Risks and Considerations - There is a risk that the pace and magnitude of potential Fed rate cuts may be slower than anticipated[6]