US employment data from ADP shows that July added 104,000 jobs, surpassing expectations of 75,000. However, the previous month had seen a drop of 33,000 jobs. Goods-producing jobs grew by 31,000, slightly below the updated estimate of 32,000. Meanwhile, service jobs increased by 74,000, a recovery from the earlier decline of 66,000. Wage growth for current employees stands at 4.4%, similar to earlier data.

Wage Growth For Job Changers

Workers who change jobs are seeing their pay rise by 7.0%, up from 6.8%. This aligns with trends in jobless claims and the non-farm payroll report, showing that the US labor market remains strong. The better-than-expected job gains in July suggest that the labor market is not slowing down, indicating a robust economy. This could lower the chances of the Federal Reserve cutting interest rates soon.

Implications For The Federal Reserve

With core inflation still around 3.5% as of June 2025, a strong job market leaves the Fed little reason to ease its policies. During 2022-2023, a tight labor market kept the central bank more cautious than anticipated. The likelihood of a rate cut in September has dropped to below 25%, down significantly from last week. Given this economic strength, implied volatility in the stock market is expected to remain low in the coming weeks. The CBOE Volatility Index, or VIX, has mostly stayed below 15 in July, and this report does not indicate an impending economic shock. This environment may favor options trading strategies on major indices. Strong job growth and rising wages are positive indicators for the US dollar. We are thus looking for chances to hold long dollar positions against currencies of central banks more likely to cut rates first. Bond traders should also consider that short-term Treasury yields will probably stay high, making bearish positions on bond futures more appealing. A key detail to watch is the rising wage growth for job changers at 7.0%. If this trend continues, it could raise inflation concerns later this year. Therefore, while we might see stability in August, it’s wise to prepare for potential market volatility as we move into the final quarter. Create your live VT Markets account and start trading now.

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