The US Economy Lost Jobs in July for the First Time This Year

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In Today's Note

• July payrolls fell 23,000 against expectations of an 80,000 gain, and the prior two months were revised down by a combined 103,000. Unemployment slipped to 4.1% only because 264,000 people left the labour force, taking participation to its lowest since February 2021.
• Fed funds futures now put the chance of a September hike at 44%, down from 67% a week ago. US spot Bitcoin and Ether ETFs drew a combined $1.1B last week, their strongest since April, with BTC holding above $65K.

Market Snapshot: Overnight Moves

Macro & Markets

• Last Friday’s nonfarm payrolls report from the BLS indicated a sharp slowdown in the US jobs market, which drove down market expectations for an imminent rate hike from the Federal Reserve.
• The US economy saw a decline in jobs in July as payrolls fell by 23,000 (against expectations of a 80,000 gain), while hiring in the prior two months was revised lower by a total of 103,000 jobs.
• The unemployment rate fell to 4.1%, however that was largely a byproduct of a decline in the labour force participation rate (the proportion of working-age Americans who have a job or are looking for one). 264,000 people left the labour force, pushing the participation rate to its lowest since February 2021.

• Since the March nonfarm payrolls report, jobs added by the economy on a monthly basis have steadily declined, though July is the first to see a negative figure for the year.
• The decline in payrolls was driven primarily by cuts in government jobs as well as declining jobs in the leisure and hospitality sector.
• Local government education employment dropped by 49,600, the most since October 2021 and leisure & hospitality employment fell by 40,000.
• The decline in government jobs overall outweighed a net 30,000 gain in private-sector payrolls for the month.

• Risk assets and US treasuries rallied higher on the back of the report.
• The S&P 500 finished up 0.62% closing at a record high, with the tech-heavy Nasdaq-100 rising 1.19% and a gauge of semiconductors outperforming by 2.56%.
• BTC rose above $65K and has since spent most of the weekend consolidating around that level, with ETH equally rising to $1,900 and since trading rangebound in that region.
• US spot Bitcoin and Ether ETFs recorded a combined $1.1B in inflows last week, marking their strongest weekly performance since April.
• Bitcoin ETFs attracted $853.5M across five consecutive positive sessions, while Ether ETFs added $244.9M, extending their inflow streak to five weeks.
• Precious metals also extended their gains, with gold hitting a seven-week high and currently up 7% over the past five days.
• The yield on the 2-year treasury, most sensitive to changes in Fed monetary policy, declined 8bps to 4.16% but has since moved back up close to levels it fell from (4.22%).
• Fed funds futures now see a 44% chance of a September rate hike by the Fed, down from 67% only a week ago.

• After the report, Richmond Fed President Tom Barkin said it “was very consistent with how I’ve been seeing the labour market, which is it’s not loose, it’s not tight, it’s sort of in a weak balance”.
• While not a voting member on the committee this year, Barkin added that, “It’s a lot easier to sail, you know, when the jib’s open and the wind’s at your back. If the wind’s in your face, you just have to tighten up a bit, and that may be the kind of environment we’re in.”

• Risk assets also gained on Friday on hopes for a reopening of the Strait of Hormuz after Reuters reported that a US official expects a deal very soon and Iranian Foreign Minister Abbas Araghchi said Iran is “very close” to a deal with Oman on a new maritime transit route.
• The agreement will enable temporary lanes to allow ships to enter and exit the Persian Gulf, but won’t result in a full reopening of the strait, which is "subject to other conditions, including the compensation for the US's violations of the Islamabad Agreement", the now-lapsed memorandum signed back in June.
• Reuters cited a US official on Friday who said, "There is progress between Oman and Iran on the Strait, and we expect a deal soon". That official also claimed that, "Once the deal is announced to restore commercial shipping without impediments, the United States will lift the blockade of Iranian ports."

• In an interview with Axios yesterday, President Trump indicated he’s willing to pressure Iran economically rather than launch fresh military strikes, "We are only semi-negotiating with them. We are just watching Iran with its huge inflation and the fact they have no money."
• He also claimed that "It will work out. It always works out. It's like a chess game."

DeFi / Web3 / Altcoins / Crypto3

• Senate Majority Leader John Thune filed cloture on the Clarity Act, the U.S. crypto market-structure bill intended to establish a federal regulatory framework for digital assets, setting up a Sept. 15 Senate vote on whether to move the legislation toward floor debate.
• The procedural motion requires 60 votes and would not pass the Clarity Act itself; with Republicans holding 53 seats, at least seven Democrats or independents would need to support cloture if all Republicans vote in favour.
• Negotiations remain focused on ethics rules, illicit-finance provisions and integration of Senate Agriculture Committee language, with a bipartisan proposal from Sens. Ruben Gallego and Thom Tillis seek restrictions on public officials’ crypto activities, while concerns over stablecoins drawing deposits away from banks remain another obstacle.

• SharpLink, the second-largest publicly traded Ethereum treasury company, has formally opposed EIP-8363 (“Tapered Issuance Burn”), a proposal that would progressively burn a larger share of validator rewards as more ETH is staked, eventually reducing issuance-based staking yield to zero if roughly 50% of ETH supply is staked.
• CEO Joseph Chalom argues that staking yield is one of Ethereum’s key advantages over Bitcoin because it makes ETH a natively yield-generating asset and provides a base rate for DeFi lending, liquid-staking products and institutional capital deployment; reducing it could raise capital costs and push activity elsewhere.
• The proposal, authored by researchers including Justin Drake and Jérôme de Tychey, would phase in the changes over roughly 18 months and aims to limit excessive staking and reduce dilution for non-stakers, but critics including Aave founder Stani Kulechov warn that unpredictable or lower staking yields could weaken institutional demand and Ethereum’s economic security.

• Trump Media and Crypto.com have mutually ended two partnerships as market conditions and corporate priorities shift, including plans to create Trump Media Group CRO Strategy, a publicly traded treasury company designed to accumulate Crypto.com’s CRO token.
• Crypto.com will also no longer support Yorkville America’s planned Truth.Fi ETFs, including proposed crypto funds, although Yorkville said its existing and future ETF plans remain unchanged.

• The CFTC, the U.S. federal regulator overseeing derivatives markets, has warned regulated prediction-market platforms against displaying American-style “moneyline” odds, the +/− format commonly used by sportsbooks to show potential payouts, and cautioned against deceptive practices when listing or advertising contracts.
• Prediction markets typically quote contracts in cents representing implied probabilities, such as 60¢ corresponding to roughly a 60% probability, and the CFTC cited research suggesting that presenting the same wagers as American-style odds can encourage greater risk-taking.
• The warning comes as CFTC Chair Michael Selig argues the agency has exclusive jurisdiction over federally regulated prediction markets, including sports-event contracts, while states and tribal gaming regulators argue that such products can constitute gambling and should remain subject to their gaming laws.

• Bitcoin’s BIP-110 supporters have split onto a minority chain after nodes backing the proposal began rejecting blocks that did not signal support.
• The fork started at block 961,632, but the BIP-110 chain quickly fell behind Bitcoin’s main network due to limited mining support.
• Only 2.53% of blocks signaled for BIP-110 during the previous two-week period, far below the 55% threshold required to lock in the proposal without a split.
• BIP-110 proposes temporary restrictions on non-financial data, including Ordinals inscriptions, reigniting the debate over how Bitcoin’s limited block space should be used.
• Despite the chain split, Bitcoin continued operating normally on the dominant chain.

• Robinhood is adding crypto trading to its UK investing app, allowing eligible customers to buy and sell more than 50 digital assets, including Bitcoin and Ethereum, alongside its existing investment products.
• The service is being provided through Bitstamp, which Robinhood acquired last year.
• Crypto trades will not carry a separate trading, account maintenance or custody fee, although FX charges apply at 0.1%, rising to 0.3% for some weekend conversions.
• Crypto trading is provided by Bitstamp UK Ltd, an FCA-registered crypto asset service provider.
• Unlike some regulated investment products, crypto holdings are not covered by the Financial Services Compensation Scheme or the Financial Ombudsman Service.

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