Until Friday, analysts had little confidence that the U.S. Federal Reserve was about to deliver an interest rate cut, but last week’s revisions to labor market data have led many to bet in favor of Jerome Powell cutting at the Fed’s next meeting in September.
On Friday the Labor Department reported payrolls grew by just 73,000 last month, well below forecasts for about 100,000. It also revised down estimates for May and June, by a cut of 258,000.
With the average gain over the past three months now averaging only 35,000, the health of the labor market is in considerably worse shape than previously believed. Full employment is half of the Fed’s dual mandate, so many now expect action (in the form of cheaper money) to spur economic activity to ensure jobs do not take any further hit. Analysts now expect the revisions to at last deliver the cut the Oval Office has been pushing for.
A furious President Trump dismissed Erika McEntarfer, the commissioner of the Bureau of Labor Statistics (BLS), for the revisions to the employment numbers. As markets open today, investors are still digesting the ramifications of the data that suggests tariffs are biting harder than previously hoped. On top of that, speculators will also be bracing for further volatility as Trump’s latest tariff deadline—Aug. 7—creeps closer.
