Confirmed US Labor Market Slowdown, Increased Probability of Interest Rate Cut

Hana Securities evaluated on the 8th that the probability of the Federal Reserve (Fed) cutting interest rates has increased as a gradual slowdown in the labor market was confirmed through last month's U.S. nonfarm payrolls.

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The U.S. nonfarm payrolls for last month, announced on the 5th (local time), slowed down to 206,000 compared to 218,000 in the previous month. The unemployment rate rose by 0.1 percentage points to 4.1%, exceeding the expected 3.9%. Additionally, the population unemployed for 27 weeks or longer increased from 20.7% in May to 22.2% in June.

Jeon Gyu-yeon, a researcher at Hana Securities, stated, "Although U.S. new employment continues to increase at a solid pace, the momentum of growth has weakened compared to the previous month, and considering that employment figures have been revised downward through preliminary and final data after the statistical release, the labor market is showing a gradual slowdown trend. Since the June unemployment rate has risen close to the Fed's long-term unemployment rate forecast of 4.2% presented in the June economic outlook, it has entered a phase where it is burdensome to indefinitely delay interest rate cuts."

He added, "In the June Federal Open Market Committee (FOMC) minutes, many members pointed out that labor market conditions are cooling and the pace of layoffs could accelerate, emphasizing the need to carefully monitor the labor market. Concerns about the employment market are gradually emerging, increasing the necessity for the Fed to proactively cut interest rates in the second half of the year." He further noted, "Under the current circumstances, there will be two interest rate cuts in September and December."

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