1. The economy lost 23,000 jobs, and the September hike trade died with it.
July payrolls came in at minus 23,000. Everyone expected a gain of about 80,000. It's the first drop in four months, and the revisions were worse than the headline: June fell to plus 20,000, and the two prior months lost 103,000 between them. But look at what actually shrank. Private payrolls added 30,000. The losses were local government education, down 50,000, and retail, down 19,000. Unemployment fell to 4.1%, which sounds good and isn't. Participation dropped to 61.4%, a five-year low. The rate improved because people stopped looking, not because they got hired. Wages cooled to 3.2%. Rates repriced fast. Thursday, traders had a September hike at 55%. By Friday's close most expected a hold, and the 10-year sat near 4.6%.
Why you care: Last issue we said September was live. One number erased it. Rate paths move that fast, and every LBO you model is a bet on where that path goes.
Interview angle: "Headline was negative, but private payrolls grew. The losses were government education and retail, so I wouldn't call it broad weakness. What moved was the Fed path. A September hike went from a coin flip to off the table in one session, and that's cheaper debt for every sponsor. Unemployment also fell for the wrong reason, on participation, not hiring."