A surprisingly bad job report reveals a months-long food stall and could quickly lead to a Fed rate reduction. “Powell will regret holding interest rates consistently.”
The US labor market appears to be far weaker than previously thought, and Wall Street is hoping that the Federal Reserve will resume interest rate cuts sooner than later.
The Labor Bureau reported Friday that pay increased to just 73,000 last month.
However, downward revisions in the past few months have further shocked investors, revealing that the labor market has been suspended near spring. The tally in May was reduced from 144,000 to 19,000, while the total in June was reduced from 147,000 to just 14,000, resulting in a total of 258,000 reductions. The average increase over the past three months is currently 35,000.
The news came days after the Fed kept the fees up again. Chairman Jerome Powell shows his ongoing desire to wait for more data on how President Donald Trump’s tariffs will affect inflation and see how they will affect inflation around the central bank’s 2% target.
“This week, Powell will regret a steady interest rate,” said Jamie Cox, managing partner at Harris Financial Group, in a memo. “September is a lock on rate reductions and could even be a 50 base point move to make up for lost time.”
Even as the labor force shrinks, the unemployment rate has been extended from 4.1% to a maximum of 4.2%. Meanwhile, US factories continued to cut and cut jobs of 11,000 last month, after cutting 15,000 in June and 11,000 in May amid uncertainty over Trump’s trade war.
S&P 500 has dropped by 1.7%, Nasdaq A 2.3% decrease. The 10th Treasury yields have sunk over 11 basis points to 4.247% as interest rate cuts at the Fed meeting next month and Wall Street prices are being set later that year.
After the employment report, Trump repeated months of demand for the Fed to lower interest rates, but Cleveland Fed President Beth Hammack withstanded a central bank’s decision to stabilize policies on Wednesday.
“The 73K headline NFP is a mistake, but it’s probably a net revision of the previous two months -258K. These revisions made the May headline NFP at 19K and June 14K.” “If these numbers were the first print a month or two ago, they would have significantly changed the labor market narrative throughout the summer. In fact, the odds of rate reductions in September have increased significantly behind the scenes of this data release.”