September 50bps Rate Cut Gains Momentum as JOLTS Report Highlights Labor Market Weakness: Citi

Investing.com — The expectation of a significant 50 basis point rate cut at the Federal Reserve’s upcoming meeting received enhanced support on Wednesday, as analysts at Citi noted that a larger-than-anticipated decline in job openings indicates a potential weakening in the labor market.

Citi analysts commented that “today’s report adds to the evidence that the labor market is not only more relaxed than before the pandemic but is also continuing to cool, possibly at an accelerated rate.”

Job openings fell more than expected in July to 7.67 million, down from a downwardly adjusted 7.91 million in June, resulting in a vacancy-to-unemployed ratio of 1.07-to-1, which is below pre-pandemic levels.

As the labor market takes center stage in monetary policy discussions, every new piece of information about its status becomes increasingly significant.

This softer job openings data arrives just before the Employment Situation report, which is set to be released on Friday. Citi forecasts the report will reveal approximately 125,000 new jobs added and an unemployment rate of 4.3% for August, influenced by an ongoing slowdown in hiring within leisure, hospitality, and government sectors.

The analysts highlighted potential risks regarding leisure and hospitality hiring, as well as government employment, noting the “depressed hiring rate in leisure and hospitality and slowing hiring within the government sector.”

Citi suggests that September may not be the only occasion for a substantial rate cut, predicting that the Federal Reserve could implement another 50 basis point reduction in November as the labor market continues to exhibit signs of weakness.