Stocks erase gains, head for big weekly losses after jobs report

Monthly revisions to August’s jobs report showed employment was revised down by a combined 86,000 for the months of June and July. But one economist told Yahoo Finance’s Morning Brief the revisions don’t necessarily point to more weakness.

“It just confirms the cooling trend that we all identified,” said Joe Brusuelas, chief economist at RSM. “I don’t think this is at risk of the labor market just turning over.”

Brusuelas noted the job market only needs to add around 100,000 payrolls to keep the unemployment rate stable.

“What we should expect to see going forward is the trend cooling to about 100,000 a month,” he said. “When you’re at full employment like the US economy is — and that’s a good thing — it’s hard to generate a lot of jobs. It just is. And [the labor market] shouldn’t because firms have been hoarding labor for a number of years.”

In August, the labor market added 142,000 nonfarm payrolls, fewer additions than the 165,000 expected by economists. Meanwhile, the unemployment rate fell slightly to 4.2%, down from 4.3% in July.

The debate now turns to how much the Federal Reserve will cut interest rates. And the answer isn’t clear.

“We still believe that the Federal Reserve will only lower rates by 25 basis points during the Federal Open Market Committee meeting in less than two weeks and open the door, by updating the dot plot, to more rate cuts before the end of the year, based on ‘incoming data,'” Eugenio Aleman, chief economist at Raymond James, wrote in reaction to the report.

But others see a 50-basis point cut on the horizon.

“Our base case is for 50bp,” wrote Andrew Hollenhorst, chief US economist at Citi Research, although he did admit the “report is not definitive for the size of the September rate cut.”

Markets are pricing in a 40% chance the Fed cuts rates by 50 basis points by the end of its September meeting, up from a 30% chance seen a week prior, according to the CME FedWatch Tool.