Prominent economists are sharing their opinions on last week’s weaker-than-expected jobs report, seeing it as a clear sign of a slowdown in America’s labor market.
Optionality For A 50 Point Rate Cut
The jobs report by the Bureau of Labor Statistics last week showed that the U.S. economy added just 22,000 jobs in August, a significant drop from July’s 79,000, and below the 75,000 that economists had expected.
Revisions to prior month reports added to the gloom and pessimism, with June payroll figures cut by 27,000, alongside a modest 6,000 increase for July. The markets, however, rallied following the results, owing to the rising odds of a rate cut in September and another one in October.
According to Jason Piepmeier, the professor of finance and economics at the Florida Atlantic College of Business, “this is the data the Fed needs to begin rate cuts.”
He says in a post on X, that the latest job market data “gives optionality for a 50 bps Fed rate cut,” adding that “they could have cut in June and July if they had better data.”
Figures Worse Than Reported
Economist David Rosenberg criticized the BLS’ Birth-Death Model, saying that it “managed to add 96,000 jobs to the headline.” This is essentially a statistical adjustment to account for new business openings and jobs lost due to businesses being shut down.
According to Rosenberg, removing those adjustments shows “a 74,000 decline.” He said that “payrolls have declined on an ex-BD basis now in each of the past four months,” something he says last occurred “in the summer of 2010 when the economy was crawling out of the Great Recession.”
Echoing Piepmeier’s sentiments on the issue, Rosenberg said in a post on X that, “The Fed has to start taking its head out of the sand.”
Rate Cuts ‘Will Harm The Labor Market’
Economist Peter Schiff, however, is not in agreement with this. Reacting to Labor Secretary Chavez-DeRemer’s remarks that “Jerome Powell needs to do his job and cut those interest rates now,” Schiff says that cutting interest rates now will only serve to harm the labor market.
“Rate cuts now will harm the labor market by weakening the dollar, driving up consumer prices, and pushing long-term interest rates higher,” he said on Sunday, in a post on X.
According to the CME Group’s Fed Rate Monitor Tool, there is currently a 91.7% probability of a 25-basis-point rate cut during the Fed’s meeting on September 17. 2025. The markets also price a 74.8% probability of another 25-basis-point cut in October.
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