“We need to take a big cut to cool down the job market”
“Concerns about the recession sending the wrong message” counterargument
Fed’s interest rate cut on the 17th and 18th is drawing attention
Amid growing concerns over a U.S. economic slowdown, the U.S. Department of Labor announced on the 6th (local time) that nonfarm payrolls increased by 142,000 in August. This was significantly lower than the Wall Street forecast (160,000 increase) by Reuters and others. It was better than July (89,000 increase) when the term “employment shock” was used, but fell short of market expectations.
Accordingly, the possibility has increased that the US central bank, the Federal Reserve (Fed), will lower the current 5.25-5.50% benchmark interest rate at the Federal Open Market Committee (FOMC) meeting on the 17th and 18th to decide the benchmark interest rate in order to restore employment. The unemployment rate in August was 4.2%, the same as Wall Street expected.
According to the Labor Department on this day, the number of nonfarm payrolls in August increased by 142,000 from the previous month. The number of nonfarm payrolls in July, which had initially increased by 114,000, was also revised downward to 89,000.
However, the unemployment rate in August was 4.2%, down slightly from 4.3% in July. Average hourly wages in August also rose 0.4% from July, exceeding Wall Street expectations of 0.3%.
Wall Street’s reaction to the data was mixed. The unemployment rate, which was only 3.7% in January, is steadily rising, and the number of nonfarm payrolls in August fell short of Wall Street expectations, leading some to argue that “the Fed should move aggressively to cut interest rates as the job market has proven to be cooling.”
In other words, since the interest rate cut is a done deal and the key is the “size of the cut,” the Fed should move toward a so-called “big cut” (a 0.50 percentage point cut) at the September FOMC meeting instead of the 0.25 percentage point cut that many are expecting. Michael Feroli, JPMorgan’s chief economist, told CNBC, “If the Fed does not cut rates by 0.50 percentage points starting this month, a dangerous situation could arise in employment and other areas.”
However, there is also a counterargument that “since the unemployment rate in August has improved compared to July, an excessive interest rate cut can only send the wrong message that an economic recession is imminent. We should be cautious.” George Lagarias, chief economist at consulting firm Forvismazar, opposed the idea, saying, “A ‘big cut’ can send the wrong message to the financial market and the economy. It is dangerous.” Bloomberg, Reuters, and others also diagnosed that the August employment index was not bad enough to strongly argue for a 0.50% point interest rate cut.
On the 6th, the New York stock market showed a mixed trend at the beginning. The Dow Jones Industrial Average started slightly higher, while the Nasdaq index fluctuated within the consolidation range.
Reporter Kim Bo-ra [email protected]
New York = Correspondent Im Woo-sun [email protected]
-
- great
- 0dog
-
- I’m sad
- 0dog
-
- I’m angry
- 0dog
-
- I recommend it
- dog
Hot news right now
2024-09-08 07:32:59