The US non-farm payrolls report pointed to an economy significantly worse than believed.The data showed the economy shedding 23K jobs in July, far worse than +80K expected and below any estimates in the survey of economists. Worse yet, the prior two reports were revised lower by a combined 103K jobs dropping the three-month average to just 20K jobs.The market had been leaning towards a rate hike in September and priced in at 57% just before the data but that's fallen to 44% afterwards. With that, the US dollar dropped across the board. USD/JPY fell particularly hard and is now down 127 pips on the day to 157.14.The US dollar also tumbled against the Canadian dollar as -- at the same time as the US non-farm payrolls report -- Canada's employment report showed 75.1K jobs compared to 15.0K expected. That pair is down 65 pips to 1.3948 and the lowest since June 15.A big beneficiary of the drop in the dollar and the recalibration of Fed rate expectations is gold. It rallied hard earlier in the week and has jumped $122 to $4360 today. The weekly chart is now showing a big bounce after months of selling.Equity markets are also upbeat about the number as it lowers the chance of a rate hike. S&P 500 futures are up 41 points, roughly doubling the pre-market gain. That said, much of the focus in stock markets is on the AI/tech trade rather than the intricacies of the economy.In the bond market, US 2-year yields are down 6.8 bps on the day to 4.17%, relieving some of the pressure on bonds and adding a bid for safety in case the econom takes a sudden drop.As for me, I'm fairly skeptical of this number. I flagged some weakness in my non-farm payrolls preview so I'm not shocked but the numbers from ADP and ISM don't indicate any kind of big contraction or sudden drop in US hiring. I expect this to bounce back fairly quickly but also to re-ignite the debate about what is the steady-state of 'full' US employment monthly gains given aging demographics and low immigration. It wasn't long ago that some Fed officials were saying that +20K monthly jobs were good enough. We will have to see if they still believe that.For me though, the most-concerning part of the US labor force is how many people are dropping out of it, with nearly 1 million workers lost since May alone. Note the spart decline in the labor force participation rate. This article was written by Adam Button at investinglive.com.