Bond yields are lower this morning following the PCE inflation report, which came in as expected. However, the year-over-year numbers were slightly hotter due to revisions.

July BLS Jobs Report Highlights

• Headline Job Creation: Only 73,000 jobs were added in July, below estimates of 110,000.
• Raw Numbers & Seasonal Adjustments: The unadjusted data showed 1.07 million job losses, which were offset by seasonal adjustments and the Birth/Death model (+257,000 jobs).
• Major Revisions:
  • May: Revised from 139,000 → 144,000 → now just 19,000.
  • June: Dropped from 147,000 → 14,000 (possibly more revisions coming).
  • Total downward revisions for May & June: –258,000 jobs.
  • Average monthly revision in 2025: 77,000—double last year’s average.
• Private Sector Jobs: Only 83,000 added, mostly in education and healthcare. June was revised down to flat.

Household Survey & Unemployment

• Job Losses: 260,000 lost per the Household Survey.
• Unemployment Rate: Rose to 4.2% (actual: 4.248%).
• Labor Force Participation: Dropped to 62.2%, down 0.4% over 3 months (~7 million exited workforce).
• U-6 Rate: Up from 7.7% to 7.9%.
• Full-Time vs. Part-Time: 440,000 full-time jobs lost; 247,000 part-time jobs added.

Wages and Hours

• Average Hourly Earnings: +0.3% MoM; +3.9% YoY (slightly hotter than expected).
• Workweek: Increased to 34.3 hours.
• Weekly Earnings: +0.6% MoM. Annualized take-home pay up from 3.5% → 4.2% due to longer hours.

Fed Governors Bowman & Waller Weigh In

Both dissented at the July 30 FOMC meeting, advocating for a 25-bps rate cut. Their reasons included:

• Weak GDP (~1.2% in H1 2025).
• BLS job data overstated due to ongoing revisions.
• Tariff-driven inflation spikes seen as temporary.

Bowman's New Metric: Core PCE minus tariffs is estimated at 2.5%, suggesting inflation pressures are artificially elevated.

Had the Fed seen the real initial job data (19k in May, 14k in June), a rate cut likely would have occurred this week.

Bottom Line

This report reinforces growing concerns over the reliability of BLS data and highlights a much softer labor market than initially portrayed. With job growth slowing, revisions increasing, and inflation stabilizing, the case for a Fed rate cut is stronger than ever.