Labor market slowdown
Just days ago, Fed Chair Powell mentioned that the central bank has the opportunity to review two more employment and inflation reports before the September 17 meeting. However, the sharp reversal in labor market momentum was unexpected. The three-month average for job gains is now just 35,000, highlighting the dramatic cooling in hiring.
Just days ago, Fed Chair Powell mentioned that the central bank has the opportunity to review two more employment and inflation reports before the September 17 meeting. However, the sharp reversal in labor market momentum was unexpected. The three-month average for job gains is now just 35,000, highlighting the dramatic cooling in hiring.
Economic headwinds from tariffs, immigration policy, and aging demographics amplify hiring pressures, especially in vulnerable sectors like manufacturing and construction. Downward revisions—258,000 jobs cut from May and June estimates—indicate deeper labor market weakening.
The U.S. dollar experienced a weakening trend, providing a boost to equities that rebounded despite initial jitters. This move is somewhat ironic given that former President Trump has often voiced support for a stronger dollar. Meanwhile, gold prices spiked nearly 2%, driven by the softer-than-expected jobs data and fears surrounding renewed trade tensions.
Fed governors aren’t supposed to be politically motivated, but biases are common.
The softening employment data, combined with substantial downward revisions to prior months, has greatly strengthened the case for a Fed rate cut, possibly as soon as September. Market estimates now place a 90% probability on a September cut. Economists view this jobs report as a turning point, suggesting a clearer path to easing if inflation remains contained.
In July, the U.S. jobs report quickly altered the narrative. Atlanta Fed President Bostic recognized this shift, indicating the need to reassess Fed policy, moving from solely inflation concerns to a balanced view that considers growing labor market issues. The report highlights a decline in job growth momentum, suggesting a broader slowdown in employment conditions.
- Philip N. Jefferson — Vice Chair (appointed in 2022, began serving in September 2023).
- Michael S. Barr — Governor (appointed in 2022).
- Lisa D. Cook — Governor (appointed in May 2022, first African American woman on the Board).
- Adriana D. Kugler — Governor (appointed in 2023, first Latina on the Board).
Fed governors aren’t supposed to be politically motivated, but biases are common.
Four regional presidents vote alongside the New York Fed president with a permanent vote:
- Susan M. Collins – President, Boston Fed
- Austan D. Goolsbee – President, Chicago Fed
- Alberto G. Musalem – President, St. Louis Fed
- Jeffrey R. Schmid – President, Kansas City Fed
The softening employment data, combined with substantial downward revisions to prior months, has greatly strengthened the case for a Fed rate cut, possibly as soon as September. Market estimates now place a 90% probability on a September cut. Economists view this jobs report as a turning point, suggesting a clearer path to easing if inflation remains contained.