A week of gains, bad news was good news again for the US labor market
Summary
- European and US stock markets experienced gains last week, despite the US July employment report revealing economic vulnerabilities.
- The US saw a decrease of 23,000 new jobs in July, with the unemployment rate dropping to 4.1% due to a declining labor force participation rate, particularly among older age groups.
- The labor market's decreasing supply poses challenges for economic growth, necessitating technological advancements to maintain productivity.
- In the private credit market, rising defaults, especially in healthcare and software sectors, have increased concerns, with interest rate hikes closely monitored by investors.
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Automatic translation: Originally published in Finnish 10/08/2026, 04:26 GMT. Give feedback here.
Last week was a week of gains for European and US stock markets. The July employment report from the US, released at the end of the week, revealed vulnerabilities in the economy.
| Indexes | closing | change 1 wk | year to date | |
| OMX Helsinki | 13191,9 | 0,5 % | 6,2 % | |
| Eurostoxx 600 | 660,3 | 1,7 % | 11,5 % | |
| S&P500 | 7757,6 | 3,6 % | 13,3 % |
US: Number of new jobs, 1,000 jobs
Source: LSEG
The number of new jobs in the US saw a clear decrease in July, totaling -23,000. At the same time, however, the unemployment rate fell to 4.1% from 4.2% in June. The reason for this development was, however, "unhealthy," as more and more workers exited the labor force. In fact, it appears that the outflow from the labor market has accelerated, especially among older age groups: the participation rate, which indicates the proportion of the population involved in the labor market, has decreased from 40% before the COVID-19 pandemic to the current 37%. Several reasons have been suggested for this phenomenon, ranging from an aging population to an increase in wealth among older age groups, which allows them to leave work earlier.
Participation rate, over 55-year-olds, %
Source: LSEG
The change has been significant and occurred in just a few years, indicating that the labor market supply is also decreasing. This counterbalances the decreasing demand but adds challenges to the economic growth outlook. If the number of working hands decreases, technological development (i.e., AI) is needed to maintain productivity. Otherwise, employment statistics did not yet show signs of major concerns: the number of long-term unemployed has seen moderate growth, as has the proportion of part-time workers who desire full-time employment, but no major spikes have been observed in these statistics. However, the employment report, which fell short of expectations, managed to shift interest rate hike expectations. According to CME Group's Fed Watch, the probability of a rate hike at the September meeting fell to 46% on Friday, compared to 67% a week earlier.
US: Number of long-term unemployed, 1,000 people
Source: LSEG
US: Part-time workers who desire full-time employment, millions of people
Source: LSEG
The state of the financial sector also indicates the health of the US economy. The private credit (PC) market has regularly made headlines due to increased stress levels. In this market, client funds are invested in companies that are already indebted. Interest income has been high, and investors have been pleased, but recently, growing defaults on debt payments have increased nervousness. According to data collected by the WSJ, the number of defaults in many private credit companies has reached its highest level in years. Healthcare companies, in particular, have struggled to repay their loans, but problems are now feared to spread to software companies, which can account for up to a fifth of the loan portfolios of several private credit companies. Typically, rising interest rates are bad news for the PC market, so the Fed's actions are certainly being closely monitored there as well.
Source: WSJ
