The odds of a rate cut this month rose to 95.6%, according to CME’s FedWatch tool, after the Job Openings and Labor Turnover Survey (JOLTS) issued another red flag for the labor market. July’s layoff level rose to 1.808 million, above the estimate of 1.639 million. June’s layoffs were revised higher to 1.796 million from 1.604 million.
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In addition, job openings fell to 7.181 million from 7.357 million in June and missed the estimate of 7.380 million. June’s job openings were revised lower from 7.437 million.
A Soft Labor Market Spurs Rate Cuts
This morning, Fed Governor Christopher Waller reiterated his call for a rate cut during the September 16-17 Federal Open Market Committee (FOMC) meeting in order to front-run the risk of a weak labor market.
A weaker labor market increases the rationale for the Fed to cut rates because lower borrowing costs can stimulate hiring and economic growth. By making credit cheaper, businesses may be more willing to expand and take on new workers. At the same time, households benefit from reduced interest expenses, which can help boost consumer spending.
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