Quick Bites | US Jobs Market Suggest Rate Cuts Are Coming

The US labour market is showing signs of weakness, with employers easing hiring and a rising share of jobless Americans.

The June US non-farm payrolls data revealed that there were 206,000 jobs added last month, a pretty good gain. However, the markets were focused on the downward revisions to prior months data which revealed a more rapid slowdown than previously thought, with a combined 111,000 fewer jobs in April and May than first estimated. That brings the three-month average of job gains to roughly 177,000, a big step down from the 269,000 seen in the first three months of the year.

Source: NYT

The US unemployment rate is ticking up, rising from 4% to 4.1%, the highest in almost three years. The June jobs report offers the clearest sign yet that the US economy is losing momentum. The data is not recessionary, but it shows that the Federal Reserve might not be able to continue its inflation fight without risking further weakness in a labour market. While that’s not good news for jobseekers, it is good news for those looking for a rate cut.

Following the release of the jobs data, futures markets put roughly 75% odds on at least one interest rate cut by the Fed’s policy meeting concluding on 18 Sept. Futures markets had previously placed 64% odds on that outcome a week ago. Additional data reports about consumer prices will prove crucial as the months roll by.