Weak Jobs Report Does Not Eliminate Prospects of Interest Rate Rise

July’s jobs report has cooled the urgency for an immediate rate hike from the Federal Reserve, but it hasn’t removed the possibility. Employers cut 23,000 jobs in July, and the prior two months were revised down, while the unemployment rate fell to 4.1% from 4.2% as more people left the workforce. Wage growth stayed subdued, pointing to an economy that may be weaker than previously assumed. Fed officials have repeatedly argued inflation is driven more by energy costs and supply shocks—linked to the Iran war and other disruptions—than by labor demand. Still, Fed impatience over missing the 2% target is rising, especially after Kevin M. Warsh pledged price stability as his top focus. At least five officials suggested borrowing costs should be higher, and three policy voters opposed holding rates at 3.5%–3.75% last week. Investors reduced expectations for September; the next CPI report is due Aug. 12 amid oil volatility tied to the Strait of Hormuz.