U.S. stock futures are higher as investors search for signs that will help them determine if the economy is weakening after a shockingly weak jobs report on Aug. 1.
Businesses added a less-than-expected 73,000 new jobs in July, the Bureau of Labor Statistics said. Even worse, job gains for May and June were revised down by a whopping 258,000, portraying a much weaker labor market than believed in late spring and early summer and setting off alarms that the Federal Reserve may have been wrong about leaving interest rates unchanged last week.
Federal Reserve Governors Chris Waller and Michelle Bowman who voted to lower rates last week “commented that they felt the Fed was being ‘overly cautious' with the risk that policy is ‘falling behind the curve,'” said James Knightley, chief international economist at Dutch bank ING. “This sentiment is likely going to be felt more broadly within the Fed after (the jobs) numbers, especially with tariffs set to eat into household spending power and corporate profits, thus creating a major headwind for growth.”
At 6 a.m. ET, futures tied to the blue-chip Dow rose 0.64%, while broad S&P 500 futures added 0.64% and tech-heavy Nasdaq futures gained 0.76%.
The CME FedWatch tool, which measures the odds the Fed will change rates at upcoming policy meetings, now shows more than an 89% chance for a rate cut at the Fed's September meeting.
However, Comerica Bank Chief Economist Bill Adams said chances for a September rate cut are high but not a sure bet.
“The decision isn’t a slam dunk, since labor supply also fell in July,” he said. “In fact, the labor force level has fallen for three straight months…The Fed will see the August jobs report before their September rate decision. If it shows labor supply declined again and held the unemployment rate steady while tariffs push up inflation, the Fed is likely to hold interest rates steady again.”
If the Fed does cut in September though, “this would heighten the chances of follow up 25-basis-point cuts in October and December despite a temporary rise in inflation on tariffs,” Knightley said.
Separately, President Donald Trump said he will name a new Federal Reserve governor and a new jobs data statistician in coming days. Last week, Fed Governor Adriana Kugler said she's resigning from the central bank's board on Aug 8, and Trump fired Erika McEntarfer, the U.S. commissioner of Labor Statistics, after the weak jobs report.
“Of the two personnel changes in economic policy Friday — McEntarfer’s dismissal, and Fed Governor Kugler’s resignation — we see the sacking of the BLS Commissioner as more significant,” said Michael Feroli, chief U.S. economist at JP Morgan. McEntarfer's firing “presents risks to the conduct of monetary policy, to financial stability, and to the economic outlook.”
