US Nonfarm Payrolls Add Just 22,000 in August, Will the Fed ‘Go Big’?

On September 5th, the US Labor Department released key employment data showing that only 22,000 nonfarm jobs were added in August, significantly below market expectations, with the unemployment rate rising to 4.3%. This data almost locks in expectations of a Fed rate cut starting in September, reinforcing investors’ expectations about the pace and magnitude of the potential cut. As of the time of reporting, the ‘Fed Watch’ tool from the Chicago Mercantile Exchange (CME) indicates that the market has completely ruled out the possibility of the Fed keeping rates unchanged in September, with an 89% probability of a 25 basis point cut and an 11% probability of a 50 basis point cut, up from 0% before the data release. The probability of another 25 basis point cut in October is approaching 80%.