U.S. Jobs Market Cools Down: Is a September Rate Cut Coming?

On July 5, 2024, we got some big news about the U.S. job market that might mean lower interest rates soon. The latest jobs report shows that job growth is slowing down, which could lead to the Federal Reserve cutting rates in September.

The June report showed 206,000 new jobs, a bit more than expected, but with big downward revisions for the past two months. This means there were 111,000 fewer jobs added than we thought. The three-month average job growth is now the weakest since January 2021. The unemployment rate went up to 4.1%, higher than last year’s 3.4%, which means more people are looking for jobs. This cooling job market is also slowing down wage growth. Average hourly earnings only grew by 0.3% from last month and 3.9% from last year, the slowest since early 2021.

Most of the new jobs were in government and private education/healthcare services. Other sectors like leisure and hospitality, retail, and manufacturing saw job losses. Private payrolls only grew by 136,000 instead of the expected 160,000.

The Federal Reserve is likely pleased with this report because it shows the economy is cooling down without crashing. This cooling means that wages aren’t rising too fast, which helps keep inflation under control. If the core CPI comes in as expected next week, we could see a rate cut in September. Some experts think we might get three rate cuts this year, bringing the rate down to 4% by next summer.

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