Tonight's weak non-farm payroll report may lock in rate cuts, while a "frozen" labor market puts pressure on the Fed.

On September 5, economists expect that the employment report to be released on Friday evening will continue the weakest employment growth trend in the US since the pandemic, which is likely to prompt the Fed to decide to cut interest rates. According to the median forecast from a survey of economists, non-farm payrolls are expected to increase by 75,000 in August, marking the fourth consecutive month of employment growth below 100,000. The unemployment rate is expected to rise to 4.3%, the highest level since 2021. In recent months, US employment growth has noticeably slowed, as recruitment activities have cooled significantly due to businesses responding to demand concerns, rising costs, and the persistent economic uncertainty brought about by President Trump’s erratic trade policies. This has put greater pressure on Fed officials to intervene and support the increasingly slowing labor market. Stephen Stanley, chief US economist at Santander US Capital Markets LLC, stated, "The labor market is essentially frozen, businesses are on pause, and we need to wait until the situation clarifies before making decisions." The job report for July, released on August 1, showed that recent employment growth was far below previous reports, altering the perceptions of many economists and policymakers regarding the labor market. The significant downward revision also prompted Trump to suddenly dismiss the director of the Bureau of Labor Statistics, raising concerns about the future integrity of US data. As the labor market condition grows increasingly fragile, Fed Chairman Powell has indicated an openness to cutting interest rates, and the weak employment report in August will further strengthen the case for a rate cut. Based on futures pricing, the market generally expects Fed officials to lower the benchmark interest rate by 25 basis points at the meeting on September 16-17. However, it remains unclear what actions the Fed will take in the upcoming meetings.