Markets sink on weaker-than-expected jobs report as fears rise of a slowing economy | CNN Business

There was already little doubt that the Federal Reserve would roll out the first interest rate cut in September. The latest jobs report showing that the unemployment rate rose even higher last month just cemented that, and it’s even possible now that the Fed could cut rates by even more than previously expected.

In addition to controlling inflation, the Fed is also tasked by Congress to keep the labor market intact, and the recent runup in unemployment is a concerning sign for the Fed.

Fed Chair Jerome Powell said Wednesday that officials don’t want to see a “material” weakening in the job market. The current unemployment rate is still relatively low, but seems to have caught some upward momentum.

This development improves the odds of a half-point cut in September, though economists and traders still mostly expect that first rate cut to be a quarter-point in size, according to the CME FedWatch Tool.

Generally, the Fed makes its decision congruent with what’s going on with inflation or the job market. In summer 2022, when inflation was running at 40-year highs, the Fed was hiking by three-quarters of a point, and during the Great Recession, the Fed cut rates by three-quarters of a point at several meetings.

There is one more jobs report before the Fed’s September 17-18 meeting, and if unemployment rises even higher, the central bank may need to cut more aggressively.