How does the biggest employment revision in 15 years affect the Fed?
The employment revision, which the markets are eagerly waiting for, was announced today with a delay of half an hour. Estimates by Goldman Sachs and Wells Fargo, the leading banking institutions of the USA, said that the downward revision would be between 600 thousand and 1 million. The Ministry of Labor reported this figure as 818 thousand.
Accordingly, it turned out that 818 thousand fewer jobs were created than previously announced during the 12-month period until March 2024. Thus, this was the largest downward revision since 2009.
The latest data showed that the labor market was not as strong as the Bureau of Labor Statistics, which is affiliated with the Ministry of Labor, announced. Thus, it put more pressure on the Fed to lower interest rates. “Investors should expect the Fed to prepare the markets for a rate cut in September,” said Jeffrey Roach, chief economist at LPL Financial.
Navy Federal Credit Union corporate economist Robert Frick commented, “Revisions are not shocking, but this puts additional pressure for the Fed to lower interest rates.”
With today's data, positions that the Fed will lower interest rates next month have increased. Investors expect interest rates to be reduced by 25 basis points next month. On the other hand, the probability of a discount of 50 basis points has also increased. Markets started to price the probability of this scenario at 30 percent.
Eyes are now turned to Fed chairman Jerome Powell's speech at Jackson Hole on Friday. #laraxen #Laraxenteam #LaraxenFamily
