Another month, another slowdown.

After a series of dismal labor market reads, culminating with this week's ADP, JOLTs and Mfg ISM reports, the rate of payroll additions is expected to ease even more in July, below the prior month's and also below recent averages. Fed Chair Powell has claimed that this is merely a gradual normalization of the labor market, which was coming back into better balance while the unemployment remains low. While the number of payroll additions is expected to be solidly in the green (only when you add all the illegal aliens getting jobs of course), the jobless rate is expected to be unchanged in July, and above where the Fed forecast it would be this year. Recent labor market proxies also allude to a slowing in payroll gains, with the weekly initial jobless claims data that coincide with the BLS survey window ticking up a touch, and continuing claims increasing, while the ADP’s gauge of employment also disappointed expectations in the month.

According to newsquawk, while the wage data are expected to continue easing, Fed officials’ focus is now pivoting back onto both sides of its mandate (rather than its recent heavy focus on just inflation); accordingly, analysts have suggested that any downside surprised in the headline nonfarm payrolls data, or any tick-up in the jobless rate, could embolden calls for the Fed to begin cutting rates. Currently, money markets are certain that the Fed will cut rates by 25bps in September, and have also fully priced a second cut this year, while retaining a very high probability that we could even see a third cut before the year is out.