Job growth has taken a considerable hit, and the economy shows signs of instability, leading to mounting pressure on the Federal Reserve to lower interest rates. Market analysts are now anticipating cuts in interest rates at all three remaining Federal Open Market Committee (FOMC) meetings this year, following a dismal jobs report.
Recent data from the Bureau of Labor Statistics (BLS) revealed that the economy added 911,000 fewer jobs in the year leading up to March 2025 than previously reported. Adjustments to earlier figures suggest a much steeper decline in payroll growth, totaling approximately 1.2 million jobs over the last 16 months. This has drawn the attention of FOMC officials ahead of their meeting scheduled for next week, strengthening President Donald Trump’s claims that the central bank has delayed necessary policy adjustments.
Citigroup’s economist Andrew Hollenhorst noted that had policymakers had real-time access to this revised data, interest rates would likely be lower today. Hollenhorst posits that the mounting evidence might even warrant a substantial half percentage point cut when the FOMC convenes on September 17. However, he anticipates that Chair Jerome Powell will likely find it easier to gather consensus around a quarter-point cut for the upcoming meeting, while signaling continued rate reductions in subsequent meetings, potentially in October.
The markets have undergone a significant shift in expectations surrounding interest rates as employment concerns have intensified. Traders are now fully pricing in a 100% chance that the Fed will implement a quarter-point reduction next week, with a slight possibility of a larger half-point cut. This marks a notable change from just a week ago when the likelihood of three rate cuts this year seemed modest at best.
Heather Long, the chief economist at Navy Federal Credit Union, emphasized the urgency of the situation, stating, “The U.S. economy barely has any jobs right now, and it’s been that way for a long time.” She asserts that the Federal Reserve must act decisively with interest rate cuts scheduled for September, October, and December, urging the White House to finalize a trade agreement with China to restore business confidence in hiring and investment.
However, some Fed officials may feel that they can afford to proceed cautiously given the murky economic data, which is further complicated by President Trump’s ongoing tariffs. Goldman Sachs has challenged the BLS’s job revisions, estimating a smaller reduction in payrolls—approximately 550,000—citing proprietary models and high-frequency data. While acknowledging the labor market has softened, Goldman Sachs argues that the BLS revisions provide limited insight into the current economic climate.
Compounding the concerns, recent reports show that nonfarm payrolls increased by only 22,000 in August. A survey from the New York Fed indicates a record low in employee sentiment regarding job security, with many workers believing they could struggle to find alternative employment. Other surveys reflect an increase in anxiety regarding job prospects.
The alarming employment figures have sparked fresh demands from the White House for immediate rate cuts. White House Press Secretary Karoline Leavitt criticized both the BLS and Federal Reserve Chair Powell, stating, “Much like the BLS has failed the American people, so has Jerome ‘Too Late’ Powell—who has officially run out of excuses and must cut the rates now.”
