Weaker-than-believed US labour market growth is reportedly fanning scepticism about the US Federal Reserve’s likelihood to cut interest rates in September 2024.
Stinted US Labour Market Growth May Hamper Rate Cuts
Bloomberg reported that economists from Goldman Sachs (GS) and Wells Fargo & Company (WFC) expect that preliminary labour revisions will reflect a 600,000 weaker payroll growth in the year leading up to March 2024. JPMorgan Chase & Company (JPM) predicted a decline of 360,000, but Wells Fargo thinks that it may even be as much as one million.
Although certain conditions must be considered, analysts indicate that a revised drop of more than 501,000 would be the greatest in 15 years. It would project that the market has been in decline for much longer than initially estimated.
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This may well influence the stance of the US Federal Reserve regarding the expected interest cuts. Based on Bloomberg data, the central bank’s chairperson, Jerome Powell, is expected to deliver his speech in Jackson Hole, Wyoming at the end of this week. In an earlier note, Wells Fargo economists Sarah House and Aubrey Woessner stated:
A large negative revision would indicate that the strength of hiring was already fading before this past April.
The note also added that this would make “risks to the full employment side of the Fed’s dual mandate more salient amid widespread softening in other labor market data”.
The US Bureau of Labor Statistics tallies payrolls according to the Quarterly Census of Employment and Wages (QCEW). This record covers the unemployment insurance records and, reportedly, “almost all US jobs”. The latest QCEW report already raised the possibility of weaker payroll gains.
