The June jobs report showed unemployment approaching a three-year high and raised the pressure on the Fed to act on rate cuts in September.
Job gains north of 200,000 last month flattered a report that otherwise suggested the US labor market is quickly cooling off, as the unemployment rate rose to its highest level since November 2021 and wage growth rose at the slowest annual rate since May 2021.
Fed Chair Jerome Powell has sought to downplay the importance of the dot plot over the last year as markets tried to pin the central bank down on increasingly precise forecasts. The absolute accuracy of the dot plot may remain murky, but the direction officials think policyBut a plurality of Fed officials still viewed two cuts as the most likely outcome this year.
Still, Feroli sees this report outlining a "gradual loosening up of a very tight labor market is consistent with the Fed’s immaculate disinflation narrative and should give the FOMC confidence to lower rate sometime in the second half." Less tolerable, perhaps, is the current softening in the labor market. Last month, unemployment was forecast to stand at 4% at the end of this year and at just 4.2% at the end of 2025. A continued uptick in the unemployment rate, therefore, seems to have the teeth to create urgency at the Fed.
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