Economic Watch: Weak U.S. jobs report signals slowing economy, giving green light to Fed rate cut

by Matthew Rusling
WASHINGTON, Sept. 6 (Xinhua) — Weak U.S. job numbers in August, reflected by a sluggish job growth, a spike in layoffs and a nearly three-year-high unemployment rate, signal a slowing economy, economists said, noting that this could prompt the Federal Reserve to begin an interest rate cutting cycle at its September meeting.
U.S. employers in August added a mere 142,000 jobs, the Labor Department reported Friday. The figure comes on the heels of a sharp rise in the unemployment rate to 4.3 percent the previous month.
“The jobs report is further confirmation (of) a slowing economy,” Brookings Institution Senior Fellow Barry Bosworth told Xinhua.
Similarly, Desmond Lachman, a senior fellow at the American Enterprise Institute and a former official at the IMF, said: “Today’s job numbers confirm the view that the economy is slowing and that labor market pressures are easing.”
Over the past two months, the economy has added slightly below 120,000 jobs per month on average, down from the 200,000-plus jobs reported monthly at the year’s start. This occurs as job openings have been declining rapidly, Lachman said.
At the same time, U.S. job cuts surged to 75,891 in August, marking a 193 percent increase from the 25,885 job cuts announced in the previous month, according to data released Thursday by Challenger, Gray & Christmas, a Chicago-based employment firm.
“August’s surge in job cuts reflects growing economic uncertainty and shifting market dynamics,” said Andrew Challenger, senior vice president of Challenger, Gray & Christmas.
Excluding the 115,762 job cuts announced in August 2020 during the height of the COVID-19 pandemic, last month was the highest August total for job cuts since 2009, according to Challenger, Gray & Christmas.
However, some economists believe the job growth is sustainable.
Dean Baker, a senior economist at the Center for Economic and Policy Research, told Xinhua: “The number the economy added is pretty close to what most economists consider the sustainable rate. Because of immigration, it is hard to get a clear sense of how many jobs the economy should be creating every month … the number was fine.”
Lachman said the weakening jobs numbers should give the Fed the green light to start an interest rate cutting cycle at its Sept. 17-18 meeting.
The question the Fed needs to answer at its next meeting is not whether to cut interest rates, but rather how much, Lachman said. “There is a case for a 50-basis-point cut. However, it is likely that the Fed will be cautious and will cut rates by only 25 basis points at its next meeting.”
“They should do 50 (basis points), but we’ll see,” Baker said.
Bosworth believes the Fed will “probably (cut) only by 25 basis points” at the next meeting.
The Chicago Mercantile Exchange Group’s FedWatch Tool, which acts as a barometer for the market’s expectation of the Fed funds target rate, showed that as of Friday evening, there was a roughly 70 percent probability of the Fed cutting rates by 25 basis points at the September meeting.
This latest jobs data comes just two months before the November elections, at a time when voters’ top concern is jobs and the economy.
“The new jobs data will not change anyone’s impression of the economy, but one sensitive area is those working part-time who want to have full-time work. This is higher than one year ago, from 4.2 to 4.8 million,” Clay Ramsay, a researcher at the Center for International and Security Studies at the University of Maryland, told Xinhua. ■