Labor Market Weakness Contrasts with Expected Fed Rate Cut

The labor market shows signs of weakening as recent data paints a concerning picture. July's JOLTS report surprised to the downside with 7.18 million job openings, below the expected 7.4 million. For the first time since the pandemic, the jobs-workers gap turned negative—a condition that persisted throughout the 2010s but now signals growing slack.

The Beveridge curve suggests further deterioration could trigger a sharp rise in unemployment. Meanwhile, the ADP employment report gains significance following the firing of BLS Commissioner Erika McEntarfer, though its implications remain unclear ahead of tomorrow's NFP data.

This labor softness contrasts starkly with market expectations for a September Fed rate cut, creating tension between economic reality and monetary policy projections.