Breaking News: July FOMC Minutes Expose Labor Market Risks, Signal Dovish Stance - JPMorgan
In a recent report, JPMorgan economists revealed that the July FOMC minutes expressed growing concerns about labor market vulnerabilities, showcasing a dovish stance from the committee. The minutes, which were from the July 30-31 meeting, indicated that the committee is more focused on labor market risks than the potential for a surge in inflation. Despite acknowledging that current inflation levels are somewhat elevated, the majority of committee members are leaning towards supporting a rate cut at the upcoming September meeting.
During the last meeting, while only a few members were considering a 25 basis point rate cut, it was clear that most members were in favor of a rate cut in September. Many participants viewed the current policy as restrictive, highlighting the need for potential adjustments.
The committee was trying to understand the impact of increasing unemployment, without underestimating the significance of the rise. There was also anticipation of downward revisions to payroll numbers, with some members suggesting that payroll gains may not be sufficient to maintain a constant unemployment rate given the flat labor force participation rate.
Economists emphasized that the decision on the size of the rate cut in September will heavily rely on the upcoming monthly employment report. Citi economists noted that the July FOMC minutes provided a clear indication that a rate cut is imminent in September, especially considering softer inflation and employment data in recent months.
The August employment data will play a crucial role in determining the extent of the rate cut in September. The July FOMC minutes hinted that some officials may support a 50 basis point cut, with Citi's base case leaning towards this scenario.
After a disappointing July jobs report, concerns grew with the revelation of a significant downward adjustment to recent payroll growth. The March 2024 nonfarm payrolls saw a revision of 818,000 jobs, marking the largest adjustment since 2009. This implies a potential downward revision of around 70k jobs per month, suggesting a lower average job growth rate than previously reported.
In conclusion, the July FOMC minutes indicate a cautious approach from the committee towards the labor market and potential rate cuts in September. Investors should closely monitor the upcoming employment data to assess the impact on monetary policy decisions and market dynamics.