The following is MBA SVP and Chief Economist Mike Fratantoni’sreaction to this morning’s U.S. Bureau of Labor Statistics report on employment conditions in July.

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“The job market definitively slowed in July. Nonfarm payroll growth at 114,000 was well below the 12-month average of 215,000, while the unemployment rate moved up to 4.3%, and wage growth slowed to 3.6%. This slowing is consistent with trends in other data including the slower hiring rate, increases in initial claims for unemployment insurance, signs of contraction in the manufacturing sector, and some signs of stress for households. Additionally, payroll growth for the prior two months was revised down by a cumulative 29,000 jobs.

“Job growth was weak across the board, with small gains or losses across the economy. Not only did the headline unemployment rate increase, but the broader U-6 measure showed an even bigger increase, highlighting that more people are struggling in this job market.

“Construction employment showed a small gain, as builders continue to work to add to housing supply given the ongoing shortage.

The Federal Reserve kept the federal funds target unchanged at its July meeting but hinted at a cut in September. The weakness in this report including the slower rate of wage growth and the higher unemployment rate certainly support such a cut, but the next inflation report needs to confirm that price growth is also slowing.

“The market is moving ahead of the Fed, bringing down longer-term rates including those for mortgages, which should lead to both more home purchases and a pickup in refinance activity.”