Rarely Has a Jobs Report Changed the Narrative So Much

The monthly jobs report from the Labor Department is often a ho-hum affair, but that was decidedly not the case with the one that came out Friday. "It's rare that a single report drastically shifts our understanding of the economy's health, but that's what happened Friday at 8:30am ET," writes Courtenay Brown at Axios. For months, the nation's labor market has been described as resilient, but the report suggests it's all been a "mirage." Details:

• It's not just that July's hiring numbers came in at a meager 73,000. It's that the previous two months were revised downward by a "stunning" total of 258,000 jobs, per the Hill. Revisions are routine after more data trickles in, but rarely are they so large—the last time for one of this size was amid the pandemic in 2020.
• One aspect of the report that might please President Trump, despite the bad news, is that it significantly raises the odds of an interest rate cut by the Federal Reserve, per the New York Times. Fed chief Jerome Powell has held off in part because he has described the labor market as "solid," but that no longer appears to be the case.

• Paul Krugman calls the report a "shocker" in a Substack post. "It's highly likely that what we're seeing is the effect of Trump's tariffs—or more precisely the uncertainty that his erratic tariff policy has created." The problem isn't just that the tariffs are high, it's that they are "unpredictable."
• The Wall Street Journal suggests the "report shows how a series of policy experiments in the early months of the Trump administration could be slowing the economy and labor markets." That includes "a crackdown on immigration that could reduce the number of people available to work, an increase in tariffs that might dampen demand, and job cuts for federal workers and other contractors and nonprofits that rely on government partnerships."
• Investors were sour on the report, as reflected by a stock market in the red. "A notable deterioration in US labor market conditions appears to be underway,'' says Scott Anderson BMO Capital Markets, per the AP. "We have been forecasting this since the tariff and trade war erupted this spring and more restrictive immigration restrictions were put in place. Overall, this report highlights the risk of a harder landing for the labor market.''