Quick Hit: The July Jobs Nothingburger

The US employment situation report dropped Friday morning … and underwhelmed. Headline payrolls shed -23,000 jobs, badly missing consensus estimates of an 80,000 gain.^[i] Moreover, the past two months’ gains were revised lower. It all rekindles some fear over a “weakening” labor market but simultaneously assuages some fears that the Fed will hike rates. So which is it: bad or good? And what should investors take from this?

We think the answer is it is a giant nothingburger for investors. Let us explain.

It is fair enough to say the headline hiring figures underwhelmed. Bloomberg put the range of forecasts entering Friday from a gain at the low end of 40,000 to 157,000 at the high end.^[ii] No one foresaw a fall, especially after ADP’s report earlier this week found that private employers added some 44,000 workers.^[iii] But therein lies the rub: Headline hiring figures include government workers and the private sector. The headline drop in July was chiefly because roughly local government workers fell by -50,000. This is largely teachers and educational workers. Strip that out and private employers added 30,000 jobs—still a touch weak, but not dramatically so. As for revisions to past hiring figures, they are routine. The BLS’s early reports are always an incomplete dataset that is later reviewed and revised.

The hiring data we saw in July isn’t out of line with what we have seen all year. Consider Exhibit 1, which shows headline and private payroll change from the prior month since 2024’s end. There is a lot of chop in that! Yet we have seen economic growth and bull market throughout. Finding a marked weakening in this latest report seems like a hasty conclusion to draw given the trend, doesn’t it?

Exhibit 1: Monthly Change in Payroll Employment

Source: Federal Reserve Bank of St. Louis, as of 8/7/2026.

The other take on these data is allegedly bullish: Weaker hiring figures mean the Fed is likelier to hold off from rate hikes, which many presume could cool the job market even further.

We see myriad fallacies with this. One is the simple notion rate hikes are auto-bad for stocks. Any cursory look at history shows this isn’t the case, but if you need a refresher, note that the early days of this very bull market came alongside a fast slate of rate hikes. Prior to that, there were hikes from 2015 through 2019 that didn’t destroy stocks. Same for an entire hiking cycle from 2004 to 2006. We don’t think a hike is a good idea today, mind you, because the yield curve is fairly flat. But one hike wouldn’t change that.

Beyond this, the presumption a weaker jobs figure means the Fed won’t hike is a forecast of the behavior and biases of 12 humans who set US monetary policy. This is always a fallacy, which we think would be rather evident given the extant talk of how new Fed Chair Kevin Warsh is changing the bank’s approach to guidance, communication and even rate policy.

We get why people closely watch the employment reports. Jobs data are among the most tangible and relatable economic metrics out there. But jobs follow growth, they don’t lead it, and it is a process error to heavily weigh a late-lagging factor when considering a forward-looking investment approach. So for all the day’s chatter, July’s weak jobs figures are pretty thin gruel for investors.