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The weaker-than-expected August employment report suggests the Federal Reserve will cut its key rate by a quarter point at their two-week meeting, economists said on Friday.
"A low payroll does not print that a Fed rate cut in two weeks," said Sal Guatieri, senior economist at BMO Capital Markets, in a note to customers.
Lily: The United States creates only 130,000 new jobs in August
Brian Bethune, an economist at Tufts University, said, "There are enough doves to get a new rate cut."
Doves take over because the economy is slowing more than expected by the Fed, said Bethune. It expects annual growth of 1.5% in the third quarter, down from 2.5% in the first half.
"Trade disputes are wreaking havoc for big business like GE and Caterpillar, which freezes like deer in lighthouses," said Bethune.
Caterpillar Inc.
CAT, -0.33%
stocks have fallen by 31% since early April 2018, when the trade war with China began. General Electric
GE, -1.53%
stocks are down 14% over the same period. The global S & P 500 index
SPX, + 0.20%
increased by 16% over the same period.
The Fed will meet on 17 and 18 September. The central bank had already cut its key rate by a quarter point at its last meeting in July with two dissensions.
Carl Tannenbaum, chief economist at Northern Trust, said he thought Fed officials opposed a rate cut would also oppose a rate cut in September following data on jobs in August.
"I do not think today 's job news will change attitudes," he said.
Fed President Jerome Powell will discuss prospects later on Friday.
Matt Luzzetti, chief economist at Deutsche Bank Research, said the August work report allowed Powell to stick to his Jackson Hole message.
Powell told his audience, at the foot of the Grand Teton mountain range, that the Fed had a bias to relax and that it still feared the repercussions of the trade, said Luzzetti. The Fed president can afford not to commit to the extent of the rate cuts, he added.
"The September rate cut will probably not be the last," said Luzzetti.
The market expects a quarter point change in September and a further quarter point reduction by the end of the year.
Other economists are not certain that the market will get many more rate cuts.
The former Obama administration economist, Jason Furman, said that he saw nothing in the data that warrants further rate cuts after September.
Ian Shephedson, Chief Economist at Pantheon Economics, noted that wage growth has increased 4.2% annually over the last three months.
"We expect the Fed to soften this month, but it will be difficult to meet the hopes of endless market rate cuts if inflation increases and future inflationary pressure strengthens." ", did he declare.
Tannenbaum from Northern Trust has accepted.
"We did not see any cracks in the US household data. The expenses were good and the job stable. It might be difficult for Powell to get enough support for the quarter-point per meeting requested by some analysts, "he said.
Inventories were slightly higher after the employment data. The S & P 500 index
SPX, + 0.20%
was up 1.46 points to 2,977.
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