The employment report has just cleared the path for an interest rate cut.

In July, the economy lost 23,000 jobs, while the expectation was an increase of 85,000.

- Non-farm payrolls: -23K vs +85K expected

- Private sector payrolls: +30K vs +78K expected

- Average hourly earnings: +0.1% vs +0.3% expected

- Unemployment rate: 4.1% vs 4.2% expected

Before today, the market priced in a greater than 57% probability of a September rate hike. Three Federal Reserve officials voted to support a rate hike this week.

It has become much more difficult to argue for a rate hike now.

Non-farm payrolls in July decreased by 23,000, which is an actual loss, whereas Wall Street had expected an increase of 85,000.

Private non-farm payrolls also fell significantly short of expectations, increasing by only 30,000 against an expected 78,000.

The unemployment rate actually dropped from 4.2% to 4.1%. This is typically viewed as good news, but at the same time, actual job positions are decreasing, which more likely indicates that people have left the labor force rather than found employment.

Wage growth has also stagnated. Average hourly earnings rose by only 0.1%, less than half of the expected 0.3%.

This combination is exactly what the Federal Reserve has been waiting for. Inflationary pressures are easing while the labor market remains stable.