Emerging-market stocks rise as Federal Reserve eases rate hike expectations

The July US employment report landed like a cold bucket of water on anyone still betting the Federal Reserve would keep tightening. Nonfarm payrolls fell by 23,000 jobs, a stark miss against economists’ forecasts calling for roughly 85,000 new positions. Emerging-market stocks and currencies promptly rallied, because nothing says “buy risk assets” quite like the world’s most powerful central bank losing its excuse to raise rates. It was the first monthly decline in US payrolls in five months, and it didn’t arrive in isolation. Prior months’ employment figures were revised downward, reinforcing the picture of a labor market that’s cooling faster than policymakers anticipated. The numbers behind the shift The Bureau of Labor Statistics released the July report on August 7-8, and the details painted a complicated picture. The headline payroll number was ugly, but the unemployment rate actually ticked down to 4.1% from 4.2%. That sounds contradictory until you notice the fine print: labor force participation also declined. Fewer people looking for work can push the unemployment rate lower even when hiring stalls. It’s the statistical equivalent of a smaller denominator making a fractio...