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Updated 4 months ago, 09/09/2024

Account Closed
  • Editorial Director at BiggerPockets
  • Atlanta, GA
40
Votes |
19
Posts

August Jobs Report Could Give Clues About Upcoming Fed Rate Cuts

Account Closed
  • Editorial Director at BiggerPockets
  • Atlanta, GA
Posted

The BLS released the August jobs report on Friday morning. You can read the full details here (https://www.bls.gov/news.release/pdf/empsit.pdf), but let me summarize what it says and why you should care about this specific release.

1. The economy added 142k jobs last month. That's up from July's 114k (which was changed to 89k). Analysts predicted about 160k new jobs, so it's still slightly off compared to experts' best guesses. But they really were just guesses. Bottom line here, it's rebounded nicely since July.

2. The unemployment rate dropped from 4.3% to 4.2%. More jobs added would, in theory, mean less unemployment, so really nothing major to take away from this.

So why should you care?

Jerome Powell announced a few weeks ago that the time has come for the Fed to cut rates, and we are expecting to hear that announcement in the next Fed meeting on September 17-18. Generally, this news is released on the last day, so go ahead and pencil in the early afternoon on Wednesday, 9/18. 

The jobs report likely won't impact whether rate cuts will come, but could impact by HOW MUCH rates will be cut. If the numbers were dismal again like July's report, more alarm bells would be going off about a recession. To me, this would signify a larger rate cut to encourage more spending and economic growth. However, since new job numbers are back up (albeit not as high as they were earlier in the year), this points more towards a soft landing than recession. 

We could sit here and debate recession vs. soft landing all day, and please, go ahead and leave your opinion in the comments. But to me, this report indicates we won't see a larger-than-expected rate cut. If I had to guess, I'd say we're going to drop from 5.5% to 5.25% in two weeks. 

But that's just my semi-educated guess. There's also another CPI report being released next week, and depending on what that says, my prediction could be thrown out the window.

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