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U.S. employment consolidates weakness; dollar and bonds correct
U.S. labor data softened across the board—fewer jobs, a higher jobless rate, and slower wage growth. The dollar slipped, equities edged lower, and gold set a new record. CME FedWatch now implies three rate cuts by year-end 2025.
Nonfarm payrolls missed forecasts while unemployment climbed, reducing odds of a prolonged restrictive stance.
Two-year Treasury yields broke key support, steepening the 2s–10s curve by nearly 50 bps.
Gold set a new all-time high, supported by a weaker dollar and soft labor data.
FedWatch probabilities now imply three rate cuts by year-end 2025.
U.S. jobs report misses; yields tumble
The U.S. economy added 22,000 jobs in August, well below the 75,000 expected. The unemployment rate rose to 4.3%, in line with the forecasts. The report points to cooling hiring and rising slack—conditions that reinforce expectations for a September rate cut.
Post-release, major equity indices dipped modestly while the U.S. The dollar index fell 0.54%. The 2-year and 10-year Treasury yields retreated to weekly lows. Payroll gains are near five-year lows, and joblessness is the highest since September 2021.
2-year Treasury yields break key support
The 2-year yield fell through a key support area near 3.50%. Because the 2-year is highly sensitive to policy rates, the break suggests that markets see monetary easing as imminent. The 2s–10s curve widened by roughly 50 bps, reflecting a view that the tightening cycle is effectively over and that longer-term growth/inflation expectations are stabilizing.
Gold surges to new record
Spot gold surged to a record near $3,600/oz, on track for its best week in almost four months. Softer labor data pushed the dollar lower and Treasury yields down—both tailwinds for bullion—while safe-haven demand likely rose as investors reassessed growth and stagflation risks.
FedWatch pricing shifts to three cuts in 2025
Following a weaker NFP and higher unemployment (4.3%), CME FedWatch shifted to three rate cuts by end-2025: a 25 bp cut in September (92% probability), a second 25 bp in October (72%), and a third 25 bp in December (67%). There is also an 8% tail risk priced for a 50 bp move in September. Only weeks ago, markets still entertained a prolonged restrictive stance; the accumulating labor softness has meaningfully changed that calculus.
