A disappointing jobs report released on Friday has led CNBC’s Jim Cramer to assert that the Federal Reserve should consider cutting interest rates. According to the report, nonfarm payroll growth for July was merely 73,000, falling short of economists’ expectations of 100,000. Additionally, the revisions for May and June reflected a downward adjustment totaling 258,000 jobs. The unemployment rate rose to 4.2%, in line with forecasts.
Cramer pointed out that with minimal job growth and stagnant wages, now is the time for the Fed to act. He expressed a strong belief in Fed Chairman Jay Powell’s leadership but suggested that the latest figures indicate the need for more immediate action to lower rates. Average hourly earnings saw a year-on-year increase of 3.9%, barely over estimates, reinforcing concerns about the state of wage growth in the country.
These job statistics come on the heels of the Fed’s recent decision to hold short-term rates steady at 4.25% to 4.5%, a stance that has been met with pressures for a reduction from both President Donald Trump and some central bank officials. The weak labor data may bolster the case for a Fed rate cut sooner rather than later, with market probabilities for a reduction in the upcoming September meeting rising dramatically from 38% to nearly 79%.
In conjunction with the labor report, a significant market downturn occurred, driven by Trump’s announcement of new tariff plans. The S&P 500 and Nasdaq each faced drops of over 1.5% and 2%, respectively, while bond yields fell, marking the lowest levels in nearly a month.
Overall, the unexpected job growth figures have raised concerns regarding the labor market and may prompt the Fed to rethink its current monetary policy approach. The situation suggests a pivotal moment for both the economy and market participants, who will be closely watching for any signals from the Fed on upcoming monetary decisions.