A weaker-than-expected U.S. jobs report has strengthened the argument for the Federal Reserve to consider cutting interest rates at its upcoming September meeting, according to analysts at Nomura.
Data released last week by the Bureau of Labor Statistics (BLS) showed that job growth in July fell short of forecasts. However, most of the market’s focus was on sharp downward revisions to job numbers from May and June. These revisions cast doubt on the strength of the economy following President Donald Trump’s April 2 announcement of increased “reciprocal” tariffs.
The disappointing labor data triggered a decline in stock markets, compounded by Trump’s move late Thursday to impose new tariffs on multiple countries. Concerns deepened further after the president abruptly dismissed the head of the BLS, claiming—without evidence—that the job figures were “rigged.” He stated a new commissioner would be appointed within days.
Nomura analysts noted that if the revised jobs data had been available before last Wednesday’s Fed decision, the central bank likely would have cut rates. The Fed opted to leave its key rate unchanged at 4.25%–4.5%, saying it needed more time to assess how Trump’s trade policies are impacting the broader economy.
While reports indicate many Fed officials haven’t shifted to a more dovish stance since the jobs release, markets are now heavily anticipating a rate cut at the Fed’s September 16–17 meeting. According to the CME FedWatch Tool, there’s nearly an 80% probability of a 25-basis-point cut.
Nomura’s team stated that unless incoming data improves significantly before then, a rate cut in September appears likely. Still, they cautioned that views on policy and market direction will hinge on whether the recent slowdown in job growth is a short-term reaction to the tariff shock or a deeper sign of weakening consumer and business activity.
