Soft Jobs Data Strengthens Case for Fed Rate Cut, Markets Eye Potential 50bps Move
Weak U.S. employment data released Friday strengthened expectations for a Federal Reserve rate cut later this month, with the possibility of a larger-than-expected 50 basis point reduction now entering the conversation.
Nonfarm payrolls increased by just 22,000 in August, well below economist estimates of 75,000 and July’s upwardly revised 79,000, according to the Bureau of Labor Statistics. June’s figure, however, was revised down to a negative 13,000—marking what would have been the first monthly job loss since the pandemic lockdowns of 2020.
The unemployment rate edged up to 4.3% from July’s 4.2%, in line with forecasts. Meanwhile, average hourly earnings rose 0.3% month-over-month and 3.7% year-over-year, both matching expectations.
Markets responded swiftly to the weaker report. Bitcoin climbed roughly $500 to $112,800 within minutes of the release, while gold surged more than 1% to a record $3,644 per ounce. U.S. stock index futures extended gains, the dollar weakened, and the 10-year Treasury yield dropped six basis points to 4.11%.
Focus Turns to Fed Meeting
The report adds weight to the Fed’s policy dilemma ahead of its mid-September meeting. While markets had been pricing in a 25 basis point cut, the sharp slowdown in job growth raises the likelihood of a more aggressive 50 basis point move.
Bitcoin, despite a modest bounce following the data, remains under pressure after pulling back from record highs above $124,000 in mid-August to as low as $107,400 earlier this week. Even Fed Chair Jerome Powell’s dovish pivot at Jackson Hole on Aug. 22 only produced a brief rally.
The prospect of a deeper rate cut could provide a tailwind for risk assets, including crypto. However, if a 50 basis point move fails to spark renewed momentum, bullish sentiment in digital assets may face a tougher test.
