US Macro Insights: July 2025 NFP Preview
Changes to immigration are likely complicating the labor market picture
Summary: Given the low conviction environment we are in, there is a wide range of estimates for July’s NFP, but most forecasts are clustered ~100k. This is likely not a coincidence, as current population estimates put breakeven jobs growth right around that level. As for how accurate consensus forecasts have been, they’ve been exhibiting a downward bias recently, with the past 4 employment reports beating expectations. If July’s jobs report continues with recent trends, we could also see June’s values revised downward by a large margin (particularly for the unusually large 40k growth in public education that pushed up state government jobs), making the July headline NFP optically better. Seasonality will also be in focus, potentially driving private sector jobs growth (excluding leisure & hospitality and construction) into negative territory, similar to the past 2 years.
Market Implication: After a long week of macro data and events, so long as the unemployment rate comes in at around 4.2% and the median monthly jobs number in the 100k area, we would expect a minor relief rally in rates (3-5bps) via a very mild curve steepening. In order to get a bigger rally (greater than 5bps) the unemployment rate would need to unexpectedly rise above 4.2% and monthly reading coming in sub 75k. We will also be looking for revisions to last month’s unusually high reading of 147k, if that gets revised lower along with weak July readings, that would accelerate the rally. Conversely, another 150k or higher print and a decline in the unemployment rate would drop September FOMC cutting odds towards 25% and take 2s well through 4% via a flattener.
