Treasury prices were modestly higher ahead of the July jobs report and are little changed immediately following the release of the numbers. Overnight, China announced that it plans to counter any new tariffs from the United States with $60 billion of new tariffs on U.S. imports. Additionally, the Chinese central bank is reinstating 20% reserve requirements on currency trading after the U.S. dollar hit a 10-year high versus the yuan in offshore trading. The move suggests Chinese officials are concerned with the tenacity of the recent yuan depreciation, particularly the risk of capital flight from the country if volatility increases further.
Nonfarm payrolls added 157,000 jobs in July, 37,000 less than expected, but at the same time, the prior two months were revised higher by a total of 59,000 jobs. The establishment survey also showed average hourly earnings rising 0.3% m/m in July (as expected), and the year-over-year rate remained at 2.7%. In the household survey, the headline unemployment rate fell to 3.9% (18 bps decline if rounded to three decimals). A 389,000 increase in household employment outpaced a 105,000 increase in the official labor pool, and the labor participation rate remained unchanged at 62.9%. Overall, this was another solid jobs report. Weaker than expected job growth was offset by decent wage growth and the near-20 bps decline in the headline unemployment rate. Also, the U-6 underemployment rate fell 30 bps to a new 17-year low of 7.5%.