US Nonfarm Payrolls Surprise Low at Only 57k: Fed Rate Hike Expectations Plunge, Bitcoin Rebounds to $61k

July 2, 2026, at 20:30 Beijing time, the U.S. Bureau of Labor Statistics released the June nonfarm payrolls report. This set of nonfarm data, the first faced by newly appointed Federal Reserve Chair Kevin Warsh since taking office, "shocked" the market by far exceeding expectations, rewriting the underlying logic of global asset pricing within just a few hours.

Nonfarm payrolls added only 57k, well below the broad market expectation of 110k to 114k; April and May data were revised down by a combined 74k; the unemployment rate fell from 4.3% in May to 4.2%. Behind this seemingly contradictory set of data—a sharp slowdown in employment alongside a decline in the unemployment rate—lies a deeper structural issue: the labor force participation rate dropping to a five-and-a-half-year low.

After the nonfarm data release, the CME "FedWatch" tool showed that the market's probability of a July rate hike by the Fed plummeted from about 30% before the data release to below 20%; as of July 3, the probability of holding rates steady in July further rose to 82.4%, with the probability of a 25-basis-point hike at just 17.6%. The probability of a cumulative 25-basis-point hike by September was 45.6%, and the probability of a 50-basis-point hike was 7.6%.

Bitcoin rebounded from a low of $59,776 to around $61,507, with a 24-hour gain of about 2.86%; Ethereum rose from $1,605 to $1,706, a single-day gain of 6.26%. The total market capitalization of the global crypto market recovered to around $2.21 trillion.

Why did a single nonfarm report trigger such a dramatic chain reaction? Where will the Fed's rate hike path head in the second half of 2026? A systematic analysis is conducted from four dimensions: data interpretation, policy framework, scenario deduction, and asset transmission.

Data Breakdown: Three Signals Behind the 57k

The "shock" of June's nonfarm data was not an isolated event but the result of multiple signals converging.

First signal: Trend slowdown, not a one-time disturbance. The addition of 57k jobs not only fell well short of market expectations but also completely overturned the strong growth of the previous two months—April's figure was revised down from 179k to 148k, and May's from 172k to 129k. The combined downward revision of 74k over two months means the market's previous assessment of the "resilience" of the U.S. labor market was based on inflated data. The slowdown in employment growth is not a single-month phenomenon in June but a downward trend extending from spring into summer.

Second signal: Weak employment masked by falling labor force participation. The unemployment rate fell from 4.3% to 4.2%, which at first glance seems a positive sign for the labor market. However, the BLS official statement clearly noted that the number of unemployed, about 7.1 million, "changed little," and the decline in the unemployment rate was mainly due to a drop in the labor force participation rate. In other words, more people left the labor force rather than finding jobs. The labor force participation rate falling to a five-and-a-half-year low is the most concerning structural signal in this report.

Third signal: Collective confirmation from leading indicators. Before the nonfarm data, multiple leading indicators had already signaled a cooling trend. ADP employment was only 98k, below expectations and the prior month, hitting a low since March. Initial jobless claims during the survey window were 227k, higher than the 210k in the May survey period; continuing claims rose from 57k to 110k. The ISM manufacturing PMI employment sub-index rose from 48.6 to 49.7, but the S&P Global manufacturing PMI employment sub-index fell for the second consecutive month, with the pace of job cuts being the fastest since the onset of the pandemic in 2020. The collective weakening of leading indicators confirmed that the softness in June's nonfarm data was not an accident but a confirmation of the trend.

The Warsh Framework: How Does the Market Price in a World Without Forward Guidance?

Understanding the market impact of this nonfarm report requires placing it within the fundamental transformation of the Fed's monetary policy framework.

On July 1, 2026, at the European Central Bank's annual forum in Sintra, Portugal, Warsh delivered his most systematic policy framework articulation since taking office. He explicitly announced that the Fed would no longer provide forward guidance on interest rates, instead relying entirely on the latest economic data for meeting-by-meeting decisions.

"Forward guidance is not the right policy tool under the current economic circumstances," Warsh said. "We will hold our next meeting in four weeks, and I hope everyone can engage in a true family debate at that time."

This represents a fundamental shift: Over the past decade or so, markets had grown accustomed to "anticipating" the policy path from the Fed's forward guidance; under Warsh's framework, each FOMC meeting becomes an independent decision event, and markets can only react passively after data releases, rather than pricing in advance.

Warsh also reiterated that the Fed will never accept inflation persistently above the 2% target. He pointed out that prices in the U.S. are still "too high," and those who believe the Fed would accept inflation above 2% "will be disappointed." On inflation, Warsh's stance is clear and hawkish.

Additionally, Warsh noted that AI model capabilities are growing exponentially, and the supply capacity expansion driven by this will become a new variable monetary policy must monitor. Improved productivity implies the economy can grow faster with lower inflation pressure. This perspective adds new uncertainty to the medium- and long-term inflation trajectory—whether AI is a deflationary force or an inflation source, Warsh said "central banks should decide," with the ultimate effect determined by data.

Warsh's framework can be summarized in three keywords: data dependence, no forward guidance, unwavering inflation floor. Under this framework, the reason June's nonfarm "shock" triggered such a dramatic market repricing is precisely because the market lost the "anchor" of forward guidance, forcing it to recalibrate expectations for the July 28-29 FOMC meeting after each data point.

Full Scenario Deduction of the Rate Hike Path: Three Possibilities, Three Outcomes

Based on the June nonfarm data, Warsh's policy framework, and current market pricing, the Fed's rate hike path for the second half of 2026 can be deduced into the following three scenarios.

Scenario One: Hold steady in July, hike in September (probability about 45%)

This is the core scenario currently priced by the market. CME "FedWatch" shows the probability of holding rates steady in July is 82.4%, and the probability of a cumulative 25-basis-point hike by September is 45.6%. The logic chain for this scenario is: the weakness in June nonfarm data provides ample reason for the Fed to hold steady in July, but Warsh's hawkish stance on the 2% inflation target means that if subsequent inflation data (especially July and August CPI and PCE) continue to exceed expectations, a September rate hike remains highly likely.

The key variable supporting this scenario is inflation data. Current oil price increases have pushed U.S. inflation to a three-year high. If geopolitical conflicts continue to boost energy prices, inflation's decline will be slower than employment's slowdown, putting the Fed in a dilemma of "weak employment plus stubborn inflation." In this scenario, a 25-basis-point rate hike in September would be a compromise to balance the dual mandate.

Scenario Two: Hold steady in July, also hold steady in September (probability about 47%)

CME data shows the probability of the Fed maintaining rates unchanged through September is 46.8%. This scenario requires a comprehensive weakening of subsequent economic data—not only a continued slowdown in employment but also a clear downward trend in inflation. If July and August inflation data show significant easing of price pressures, and the labor market's weakness evolves from "slowing" to "deteriorating," the Fed would lack justification for a rate hike.

The view of Luo Wei, chief economist of Fubon Financial Holdings, aligns with this scenario: unless oil prices spike again, the probability of further rate hikes in 2026 is very low. In this scenario, the Fed would keep rates unchanged for the entire second half of 2026, shifting the policy focus from "whether to hike" to "when to cut"—although Warsh's hawkish stance means the bar for rate cuts is extremely high.

Scenario Three: A surprise rate hike in July (probability about 18%)

CME data shows the probability of a 25-basis-point rate hike in July is 17.6%. Although this scenario has a low probability, it cannot be entirely ruled out. The trigger would be: before the July 28-29 FOMC meeting, inflation data far exceeding expectations emerges, or Warsh believes the June nonfarm weakness is a short-term disturbance rather than a trend change.

Warsh's remarks at the Sintra forum are noteworthy: he declined to reveal whether the Fed would hike in July but repeatedly emphasized that inflation is "too high." Within the Fed, 9 of the 18 officials support a rate hike this year. If inflation data surprises to the upside before the July meeting, the views of these nine officials may gain more support. However, a July rate hike would mean the Fed tightens policy despite a significant slowdown in employment data, testing market confidence and the credibility of Warsh's "data-dependent" framework.

The core difference among the three scenarios lies in the trajectory of inflation data. Employment has clearly slowed; inflation is the only uncertain variable. Under Warsh's "no forward guidance" framework, each inflation data release will become a key moment for the market to reprice rate hike probabilities.

Asset Transmission: The Chain Reaction in Treasuries, the Dollar, and Crypto Markets

The shock from the nonfarm data has transmitted through multiple channels to global asset markets.

Treasury Market: Short-end rates falling sharply, curve steepening. After the nonfarm data release, the two-year Treasury yield, most sensitive to monetary policy, plunged from around 4.1750% before the data to below 4.11%, eventually closing at 4.1371%. The 10-year Treasury yield closed at 4.4832%. The spread between the two-year and ten-year yields widened to 34.4 basis points. The steepening of the yield curve—short-end falling more than the long-end—is a standard market reaction to "cooling rate hike expectations."

U.S. Dollar Index: Fell on the news. The U.S. Dollar Index (DXY) fell 0.55% on the day to 100.85. The cooling of rate hike expectations directly weakened the dollar's interest rate advantage. If the probability of a September rate hike declines further, the dollar may face greater downward pressure.

Crypto Market: Rebound driven by improved liquidity expectations. After the nonfarm data, Bitcoin rebounded from a low of $59,776 to $61,507. Ethereum rose from $1,605 to $1,706, a 24-hour gain of 6.26%. Coinglass data shows that in the 24 hours, crypto market short liquidations amounted to nearly $450 million.

The logic behind the crypto asset rebound is clear: cooling rate hike expectations mean reduced pressure from liquidity tightening. Under Warsh's "data-dependent" framework, each weaker-than-expected economic data point could act as a short-term catalyst for crypto markets. However, caution is needed: if subsequent inflation data forces the market to reprice the rate hike path, the crypto rebound could be just as quickly reversed.

Standard Chartered raised its 12-month target for the U.S. 10-year Treasury yield from 3.75%-4% to 4.25%-4.5%. This means even against the backdrop of cooling rate hike expectations, institutions' outlook for long-term rates remains relatively hawkish. For crypto assets, this implies that improvements in the macro environment may be cyclical rather than trend-based.

Conclusion

The "shock" of the June 2026 nonfarm report is not just an unexpected data point—it is the beginning of a chain reaction involving the Fed's policy framework, market pricing mechanisms, and asset price revaluation.

Under Warsh's new framework of "no forward guidance, data dependence, unwavering inflation floor," the market has lost the anchor for policy path expectations that it relied on for over a decade. Each data release could become an independent asset repricing event. The 57k nonfarm data proved this—overnight, it pushed the probability of a July rate hike from about 30% to below 20%, and pushed Bitcoin from $59,776 back above $61,000.

The rate hike path for the second half of 2026 essentially depends on the evolution of one core variable: inflation. If inflation remains persistently above the 2% target, weak employment can only delay rate hikes but not prevent them; if inflation clearly declines, the Fed will keep rates unchanged for the entire second half. The FOMC meeting on July 28-29 will be the first verification point, and July and August inflation data will be the key variables determining whether a September rate hike occurs.

For crypto market participants, understanding the policy logic under the Warsh framework, tracking every key data release, and establishing response plans within scenario deductions may be more important than predicting Bitcoin's short-term price movements. Because in a "data-dependent" world, the only certainty is uncertainty itself.

FAQ

Q: What exactly was the June 2026 nonfarm data?

According to data released by the U.S. Bureau of Labor Statistics on July 3, nonfarm payrolls added only 57k in June, well below the market expectation of 110k to 114k. The April figure was revised down from 179k to 148k, and May from 172k to 129k. The unemployment rate fell from 4.3% to 4.2%.

Q: What is the current probability of a Fed rate hike in July?

As of July 3, the CME "FedWatch" showed a probability of 82.4% that the Fed will hold rates steady in July, and a 17.6% probability of a 25-basis-point hike. Before the nonfarm data release, the probability of a July hike was about 30%.

Q: What is Fed Chair Warsh's stance on rate hikes?

At the ECB forum on July 1, Warsh announced the end of forward guidance, stating that future decisions will rely entirely on the latest economic data. He repeatedly emphasized that inflation is "too high" and that the Fed will never accept inflation persistently above 2%. However, he declined to reveal whether the Fed will hike in July.

Q: What impact did the nonfarm data have on the crypto market?

After the nonfarm data release, Bitcoin rebounded from $59,776 to about $61,500, and Ethereum rose from $1,605 to about $1,706. Short liquidations in the crypto market amounted to about $450 million in 24 hours. The cooling of rate hike expectations improved market expectations for liquidity.

Q: What interest rate action is the Fed most likely to take in the second half of 2026?

The core scenario currently priced by the market is the Fed holding steady in July and possibly hiking in September. CME data shows a 45.6% probability of a cumulative 25-basis-point hike by September, and a 46.8% probability of rates unchanged. The final path depends on July and August inflation data.