Alarming jobs report makes potent case for the Fed to cut interest rates

Federal Reserve governors Christopher Waller and Michelle Bowman dissented from the decision to keep interest rates unchanged, believing a rate cut was warranted. They issued statements Friday morning, just before the release of a significant jobs report, explaining their dissents. Both governors expressed concerns about underlying weaknesses in the labor market. Waller specifically noted that expected data revisions suggested private-sector payroll growth was slowing considerably. He argued that with inflation near target, the Fed should cut rates before the labor market deteriorates further. Bowman echoed this sentiment, describing the labor market as less dynamic and showing increasing fragility. The weak jobs report released shortly after their statements appeared to validate their concerns. Following the report, the probability of a Fed rate cut at the next meeting in September significantly increased from 38% to 80%. Bond yields, particularly the two-year Treasury yield, also dropped in response to the news. Ultimately, Waller and Bowman's dissents are now seen as prescient, with the latest data likely to strengthen their position at the upcoming Fed meeting.