(News Bulletin 247) – The American economy has created far fewer jobs than expected, while the unemployment rate is rising. The dollar and American bond yields are collapsing, while a rate cut in September is now a given for the markets.

It was the statistic not to be missed in these first days of August. The official American employment report finally came out worse than expected.

The U.S. economy added fewer jobs than expected, with 114,000 nonfarm payrolls added in July, down from 179,000 in June. Expectations were for 185,000 jobs added last month, according to the Marketwatch consensus.

Another sign of deterioration in the job market is the unemployment rate, which unexpectedly rose to 4.3% last month, compared to 4.1% in June. This constitutes one of “the largest gaps since the Covid recovery”, notes Florian Ielpo, head of macroeconomic research at Lombard Odier Investment Managers.

“The July US employment report indicates a continued cooling in labour market conditions, consistent with recent signals from a range of other employment indicators,” notes Michael Brown, market analyst at Pepperstone.

Dollar weakness hits

For the markets, this weakness in the labor market should therefore encourage the American Federal Reserve to lower its key rates. “Given that the Federal Reserve has recently decided to redefine its growth priorities and that the signs of an economic slowdown are unexpected, the probability of a rate cut of 50 basis points (0.5 percentage points) in September is high, at least from a market perspective,” continues Florian Ielpo.

In the process, the yield on the 10-year US Treasury bond fell sharply to 3.79%, its lowest since December, while it was hovering around 4% a little earlier in the day. Above all, the euro increased its gains, or more precisely, the dollar plummeted. The eurozone currency gained 0.95% against the greenback to $1.0888, while it had gained 0.3% before these indicators. The dollar was also down sharply against the yen, with the Japanese currency jumping 1.5% to 147.25 yen.

In Paris, the CAC 40 remains down sharply by 1% below 7,300 points at 7,298.96 points after the publication of the statistics. Elsewhere in Europe, the Dax in Frankfurt plunged by 1.8% while Milan lost nearly 2%.

In the United States, leading indicators show a 1.5% drop in the S&P 500, a 2.20% drop in the Nasdaq, while the Dow Jones is also down 1.1%.