US stocks experienced a sharp decline on Friday following the release of a dismal jobs report, which indicated a softer-than-expected labor market. The S&P 500 fell by 0.6%, retreating from its recent all-time high, while the Dow Jones Industrial Average also dropped by 0.6%. The Nasdaq Composite saw a decline of approximately 0.4%. Despite beginning the day on a positive note, these declines reflect a significant pullback from earlier gains.
The Bureau of Labor Statistics reported that the US economy added only 22,000 jobs in August, falling significantly short of the forecasted 75,000. This underwhelming figure contributed to growing evidence of a contraction in the labor market, with the unemployment rate ticking up to 4.3%, compared to 4.2% the previous month. Revisions to earlier employment reports showed that over the last three months, the economy created fewer than 30,000 new jobs. Most notably, June’s figures indicated the first decrease in jobs since 2020.
This jobs report, the first issued after President Trump dismissed the former head of the Bureau of Labor Statistics, capped off a week filled with unsettling labor data. The findings have reinforced Wall Street’s expectations for an imminent interest rate cut at the Federal Reserve’s upcoming September meeting. Traders are now projecting a full 100% probability of a rate reduction, with increasing speculation about the possibility of a substantial 50-basis-point cut.
In response to the disappointing jobs data, Treasury yields fell sharply, with the 30-year yield dipping below 4.79%, while the benchmark 10-year yield reached its lowest point since April at 4.07%. Additionally, President Trump took to social media to criticize Fed Chair Jerome Powell, arguing that he should have acted sooner to lower rates. This tirade follows Trump’s attempts to reshape the Federal Reserve by confirming his nominee, Stephen Miran, as a governor.
On a more positive note, hopes surrounding artificial intelligence (AI) trading received a boost from Broadcom’s optimistic sales outlook and a significant deal to manufacture chips for OpenAI, leading to a leap of over 10% in Broadcom’s stock. Meanwhile, Tesla shares experienced an uptick following a proposal from the company’s board to reward CEO Elon Musk with a pay package potentially worth $1 trillion based on performance targets.
Gold prices surged to record levels after the jobs report, now trading above $3,650 per ounce, reflecting the increased likelihood of interest rate cuts by the Federal Reserve. Year-to-date, gold has seen a nearly 40% increase, supported by fears regarding the Fed’s independence after Trump’s leadership moves within the central bank.
The jobs slowdown has sparked widespread speculation about the future of monetary policy, with the odds of a rate cut increasing significantly post-report. Prior to the jobs data release, traders had anticipated a 97% chance for a cut; however, the new figures shifted those probabilities to a 100%, with a considerable number of investors leaning towards the idea of a larger rate cut to stimulate the economy.
June’s jobs report received particular attention, marking the first month of labor market contraction since the COVID-19 pandemic began. This raises concerns about the overall economic landscape as revisions indicated a net loss of 13,000 jobs in June, contributing to an unsettling trend within the labor market.
Overall, Friday’s developments underscore growing concerns about the US economy and the implications of a cooling labor market, fueling discussions on future monetary policy and investor confidence.
