Hi YXI friends,

Today’s Nonfarm Payrolls sting. Right after Powell insisted the Fed has not acted too late by keeping rates steady.

Recall that only on Wednesday, the Powell said that the labour market is in a period of “normalisation” and nothing more serious. 4.1% Unemployment was still historically low. Moreover, the Fed was still in the data-watching mode over the potentially unfinished inflationary resurgence.

However, Powell did concede that if the labour market softened substantially beyond the Fed’s expectations, they are ready to act swiftly. This is because maximum employment is also part of the Fed’s dual mandates, which they cannot let slip either.

Well, today’s report may just be beyond their, and the market’s, expectations. And the debate is not whether we get a cut in September, but whether the cut should be 25bp or 50bp, then do it again in November.

Let’s get to the details.

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1. Jobs down, unemployment up, AGAIN

In July, the US Nonfarm Payrolls added 114k jobs, substantially below the economist consensus of 176k. Only 1 out of the 74 forecasters had it lower.

Moreover, both June and May reports received another revision to the downside, removing 30k jobs.

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