Wall Street sees bigger 2024 Fed easing after soft jobs report

A surprisingly weak US employment report for June has turned Wall Street confidence on a soft landing into near panic that a recession is looming, prompting major firms to change forecasts for Federal Reserve easing this year to more aggressive interest rate cutting, reports Reuters.

Employers added just 114,000 jobs in July, the US Labor Department reported on Friday, and the unemployment rate rose to 4.3 per cent, from 4.1 per cent in June, marking an unexpected deterioration in a labor market that had held up surprisingly well during the Federal Reserve's aggressive rate-hike campaign in 2022 and 2023.

The data prompted futures traders to pile into bets that the Fed will deliver a half-percentage-point rate cut at its Sept. 17-18 meeting, having priced in only 25 basis points for September before the jobs data.

Fed funds futures show the policy rate is expected to end 2024 in the 4.00 per cent-4.25 per cent range from the current 5.25 per cent-5.50 per cent where it has been since July 2023.

The three main US stock indexes tumbled 2 per cent or more and investors moved into safe-haven Treasuries, pushing yields sharply lower.