Federal Reserve Rate Cut Prospects

Investing.com — A prospect of a larger 50 basis point rate cut at the Federal Reserve’s meeting later this month received significant support on Wednesday, according to Citi. This comes as a larger-than-expected drop in job openings indicates that the labor market is at risk of a sharper decline.

Citi analysts stated, “Today’s report adds to the body of evidence that the labor market is not only looser than pre-pandemic but is continuing to cool and potentially now at a faster pace.”

In July, job openings fell to 7.67 million from an adjusted 7.91 million in June, resulting in a vacancies-to-unemployed ratio of 1.07-to-1, which is below pre-pandemic levels.

With the labor market now influencing monetary policy, updates on its health are increasingly crucial. The recent softer job openings data arrives just before the August jobs report set to be released on Friday. Citi anticipates a below-consensus 125,000 new jobs and a 4.3% unemployment rate for this report, largely due to a slowdown in leisure, hospitality, and government hiring.

Analysts have indicated downside risks for leisure, hospitality, and government hiring, noting the depressed hiring rates in these sectors. Citi predicts that September may not be the only meeting to feature a significant rate cut, forecasting another 50 basis point cut in November as the labor market continues its decline.