September’s 50bp rate hiked as JOLTS report signals labor market weakness: Read By Investing.com

Investing.com — The prospect of a bigger 50 basis point interest rate cut at the Federal Reserve meeting later this month got a big boost on Wednesday, Citi said, as a bigger-than-expected decline in jobs open showed that the labor market is at risk of further weakening.

“Today’s report adds to the body of evidence that the labor market is not only weaker than before the pandemic, but continues to cool, and potentially now at a faster pace,” Citi analysts said in a note .

fell more than expected in July to 7.67 million from a downwardly revised 7.91 million in June, pushing the ratio of job vacancies to the unemployed to 1.07 to 1, below pre-pandemic levels.

With the labor market now in the driving market for monetary policy, every update on health, or lack thereof, takes on added importance.

The weaker jobs data comes just days ahead of Friday’s deadline. Citi expects a below-consensus 125,000 new jobs and a 4.3 percent unemployment rate in its August jobs report, driven by a continued slowdown in leisure, hospitality and government hiring.

Analysts signaled downside risk” for leisure and hospitality as well as government hiring, pointing to “low employment in leisure and hospitality and slowing government hiring.”

September won’t be the only meeting that could see a big rate cut, Citi said, forecasting that the Fed will cut rates again by 50 basis points in November as the labor market continues to weaken.