Good morning, investors. Berkshire reported earnings on Saturday, Wall Street dealmaking is making a comeback, and President Trump just fired the data chief at the Bureau of Labor Statistics.

All that and the only thing investors are talking about is the labor market slowdown.

Confirming the policy error

Two days after the Federal Reserve announced it would keep interest rates unchanged, the Bureau of Labor Statistics released a damning jobs report that shattered Jerome Powell’s narrative that the labor market was still robust.

The US economy added just 73,000 jobs in July — missing estimates for 100,000 — and the unemployment rate rose to 4.2%. 

As weak as the headline figures appear, it was the fine print that confirmed the Fed’s policy error.

The government revised the May and June data to eliminate a staggering 258,000 payrolls from prior estimates, which according to Goldman Sachs marked the largest two-month revision since 1968 during non-recession periods.

That puts the current pace of hiring on par with the early stages of the pandemic and the 2008 Financial Crisis. 

“[The downward revisions] calls into question just how confident we can be that this month’s number is ok and whether those pointing to other data within the JOLTS and ADP readings are right when calling for the Fed to ease now,” said Steve Wyett, chief investment strategist at BOK Financial. 

Despite the central bank’s assertion that job growth remains steady, momentum has collapsed across nearly every industry.

Healthcare and social assistance accounted for nine out of ten new jobs in July. 

Meanwhile, the quits rate sits at its lowest level in the last decade, and more than 1.8 million people report being unemployed for at least 27 weeks — the most since 2017 outside COVID.

Zoom out even slightly and the trend becomes more obvious.

The six-month moving average hovers at just 81,000 new jobs a month, a 51% drop year-over-year and, excluding the pandemic, the softest pace since 2011. 

“Divining the future is hard and past calls for a recession have been incorrect, but waiting for the ‘hard data’ to be bad may very well mean the Fed is late,” Wyett said.

Markets responded accordingly Friday. 

Stocks tumbled, bond yields dropped and traders raised their bets for a September rate cut to 80% from 61% a week prior, according to CME data.

Traders on the prediction market Kalshi, meanwhile, have raised their outlook for two and three rate cuts in 2025, while paring odds for one cut.

Now Michelle Bowman and Christopher Waller — the two Fed governors who dissented against Powell at the July meeting — look prescient alongside President Trump. All three have pointed to labor market fragility in recent months to argue for lower interest rates.

Trump, for his part, reiterated his view with characteristic, colorful language on Friday, calling Powell a “stubborn MORON” on Truth Social.

The White House, Wall Street, and a growing chorus of commentators have wanted a Fed pivot for months.

Now, the labor market data has stripped away all ambiguity, turning Powell’s patience into a policy mistake. 

“Had the Fed been aware of these massive downward revisions, the consensus among FOMC voting members would have converged on Waller and Bowman this past Wednesday,” wrote economist David Rosenberg in a weekend note.  

“Pencil in that September rate cut.”

Market snapshot

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Elsewhere

📊 Berkshire Hathaway’s operating profit dipped slightly. The figure fell 4% for the quarter to $11.16 billion, according to the conglomerate’s earnings out Saturday. It’s the first financial results since Warren Buffett announced he would step down as CEO at the end of 2025. (CNBC)

❌ The White House’s economic chief slammed the jobs data revisions. Kevin Hassett pointed to the BLS revisions as “hard evidence” to back Trump’s firing of Erika McEntarfer from the BLS. He rejected the claim that the abrupt ousting was the president “shooting the messenger” for the weak data. (Axios)

🔥Wall Street dealmaking is on fire. Activity just surged unexpectedly during what’s typically a quiet part of the summer, and last week marked the highest-volume stretch for US M&A since 2021, according to data from LSEG. (WSJ)

Rapid-fire

• More than 100 S&P 500 companies report earnings this week (Yahoo Finance)

• OPEC+ countries will boost oil output by 547,000 barrels a day (AP)

• Traders now see 15% odds of a 2025 recession, down from 70% in April (Kalshi)

• The AI spending boom is draining major US corporations of cash (WSJ)

• 12 states are back above pre-pandemic housing inventory levels (ResiClub)

• Bill Pulte, director of the Federal Housing Finance Agency, has emerged as one of Jerome Powell’s biggest critics (Barron’s)

• The US economy saw 3% GDP in the second quarter, offering a counterpoint to the cracking labor market (Yahoo Finance)

• Lower rates are just the start of a potential revamp of the Federal Reserve (Barron’s)

Last thing

About me

📰 I’m Phil Rosen, co-founder and editor-in-chief of Opening Bell Daily. I’ve published books, lived on three continents, and won awards for my journalism, which has appeared in Business Insider, Fortune, Yahoo Finance, Bloomberg and Inc. Magazine.

I write our flagship newsletter to prepare you for each trading day — unpacking markets, economic data and Wall Street with analysis you won’t find anywhere else.

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