The Fed may feel pressure to cut rates after the June jobs report

206,000 jobs were added to the US economy in June, according to the US Bureau of Labor Statistics, while the unemployment rate rose to 4.1% over the same period. Many economists see this cooling economic environment as a chance for the Federal Reserve to start cutting rates. So do Fed officials feel the same way?

News Yahoo Finance Chief Myles Udland joins the Catalysts team to comment on the Fed’s June dot plot and how regulators may now feel under pressure to begin their rate-cutting cycle.

For more expert insights and the latest market action, click here to watch this full episode of Catalysts.

This post was written by Luke Carberry Mogan.

Video Transcript

We have to dive into this June jobs report of 206,000 jobs slightly above expectations.

Goldman Sachs, very wrong asking for 100 and 40,000 miles increase.

You’ve been, uh, digesting these numbers, uh, all morning.

What do you think this means, what the Fed may or may not do to cut rates?

Yeah, I, I mean, the pressure to cut rates in September is building right now and it’s really starting to feel like when the Fed meets, what is it?

Three weeks from now, four weeks from now at the end of July, um, they’re going to set the table for a T rate cut.

And, um, I was looking at, you know, so the unemployment rate is definitely the real headline here.

We see the highest unemployment rate since November 2021.

And I think if we look at the dot plot from June, so that’s a fed prediction.

We’ve been talking for weeks now, with the fed forecast, just one rate cut in 2024.

And this is true.

But if you look at the way the points break down, you actually have a bunch of fed officials, eight fed officials who are looking for two rate cuts in 2024.

The real change is that you had four officials in June who are now not calling for rate cuts.

And I think what we really see in this set of points for 2024.

It’s probably not too much of a challenge for Jay Powell to get the food on board and the officials fed.

You know, in the next few weeks, we have the Jackson Hole symposium at the end of August, another crucial time for Powell to set the table for policy changes.

In my view, it’s not going to be super challenging for Powell to get the rest of the Fed thinking that it should be a 25 rate cut, uh rate cut in September and maybe again in December. They will buy themselves some time to see how the fall will play out in the elections, etc.

But it’s starting to feel less and less likely that the Fed won’t act come September.

Yeah, I mean, look, I’m going to pull this pin at my next barbecue and see how many people I made it.

The story continues

This was so wonderful.

I mean, I know it was upside down, especially if you have one.

I was looking at video stock charts, but at the end of the day, a lot of people just want to know when I’m going to get better here with inflation I feel like I’m paying more at the grocery store where I’m also looking at job prospects and those who are available and at the right wage to compensate where inflation is constant in the services part of the equation for themselves as well.

Well, if we keep it as the markets speak, right?

I think economists will float the idea.

The Fed is now behind the curve.

So you’re either looking at being behind the curve, which means to your question, Brad, a lot of that stuff, you know, that horse has left the barn.

We, no, the labor market is tougher there and it feels anecdotally like the 4.1% underestimate detention or, you know, kind of laxity in the labor market despite being normal, despite being normal.

I think there are many people who, especially a certain class of workers.

It’s like you’re on linkedin, you’re talking to people and it’s like, quote unquote, nobody can find a job right now.

It’s not entirely true, but it feels like it’s tighter or looser, but I keep mixing it up than a 4.1% unemployment rate.

And it seems like this notion, you know, housing costs will be brought under control, inflation will be brought under control.

It feels like it’s over.

It seems like we’re all like, yeah, no, not a good vibe out there in the economy.

And I think that’s where the Fed will feel pressure to act now because the easing is starting to look a lot clearer.