The latest U.S. employment data has triggered a strong market reaction, with the probability of a rate cut in September soaring from less than 40% to 80%. This change is mainly due to the significant weakness in the July non-farm payroll data.

In July, the number of new jobs added in the U.S. was only 73,000, far below the market expectation of 104,000. At first glance, this number, while not reaching the usual level of over 100,000, does not seem to warrant such a significant market reaction. However, what truly draws attention is the substantial downward revision of previous data.

The employment data for May and June were originally 144,000 and 147,000, considered to be quite strong performances. However, in the latest announcement, the data for these two months was revised down to 19,000 and 14,000, totaling a downward adjustment of 258,000. This extent of revision has even attracted the attention of the U.S. Bureau of Labor Statistics, which stated that it exceeds normal levels.

It is particularly noteworthy that in June, only 14,000 jobs were added, which is comparable to the employment situation during the outbreak of the pandemic in 2020. The abnormality of this data has raised questions in the market about the actual state of the U.S. job market.

An important factor in data revisions comes from adjustments to government employment data. Such a significant revision raises doubts about whether there are issues with the statistical methods used or the influence of other unknown factors.

The changes in this data not only reflect the weakness of the job market, but more importantly, it may signal a weakening of the growth momentum of the U.S. economy. In this context, the Federal Reserve may have to reconsider its monetary policy stance, which also explains why the market suddenly raised the expected probability of a rate cut in September significantly.

As signals from the job market weaken, economic data in the coming months will receive increased attention. Both investors and policymakers will closely monitor subsequent employment reports to assess economic trends and the potential need for policy adjustments.