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The June jobs report landed on July 2 and, on the surface, looked almost okay. The unemployment rate ticked down from 4.3% to 4.2%. Progress, right?
Not quite. That improvement came almost entirely because roughly 720,000 people stopped looking for work altogether. When you leave the workforce, you stop counting as unemployed. In English: the headline number got better because more people gave up, not because more people found jobs.
The numbers underneath the number
The Bureau of Labor Statistics reported just 57,000 nonfarm payroll jobs added in June. Economists had expected somewhere between 110,000 and 115,000. That is not a small miss.
For context, May’s already-modest figure was revised down to 129,000, and prior months were collectively revised lower by another 74,000 jobs.
Household employment, which the BLS measures through a separate survey from the payroll count, fell by 507,000 jobs in June. That is the kind of number that shows up in recessions, not in soft landings.
The labor force participation rate dropped to 61.5%, its lowest reading since March 2021. Outside of the COVID-19 pandemic period, that figure represents a generational low. The employment-to-population ratio, which simply measures how many working-age Americans have a job, fell to 59.0%.
Why so many people walked away
Analysts are pointing to a combination of factors. Immigration policy changes under the current administration appear to have reduced the pool of workers entering or remaining in the labor force. Retirements are also a likely contributor, as older workers who faced economic uncertainty decided to exit early rather than ride out a rocky job market.
High inflation, partly tied to geopolitical tensions surrounding the ongoing conflict in Iran, is adding pressure from the cost-of-living side.
What this means for the Fed and for markets
The Federal Reserve now finds itself staring at a genuinely uncomfortable data set. Its dual mandate covers both price stability and maximum employment. With inflation still elevated and employment deteriorating in ways the headline rate does not capture, those two goals are pulling in opposite directions.
A 57,000 payroll print, combined with a labor force that just shrank by 720,000 people, makes a strong argument for rate cuts. But if inflation remains sticky, cutting rates risks adding fuel to a fire that has not gone out.
For crypto markets specifically, the transmission mechanism here is indirect but real. Rate cut expectations tend to weaken the dollar and push investors toward risk assets. Bitcoin and other digital assets have historically responded positively to environments where real yields are falling and the Fed is in easing mode.
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