The Labor Market Shock: Implications for the Economy and Federal Reserve Policy
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The July non-farm payroll report revealed a significant weakening in the labor market, with only 114,000 new jobs added in July, far below economists' forecasts; The unemployment rate jumped to 4.3%, its highest level since October 2021, surpassing the anticipated 4.1%; The unexpected deterioration in employment data has heightened recession fears; U.S. equities experienced substantial declines across major indices, with the Dow Jones Industrial Average falling 1.5%, the S&P 500 and NASDAQ Composite suffering losses of 1.84% and 2.43%, respectively; The U.S. dollar declined by 1.08%, its steepest daily drop since November 14, 2023; The gold market experienced heightened volatility in response to these developments; The probability of a more aggressive 50 basis point rate cut by the Federal Reserve in September surged from 22% to 71.5%; The Federal Reserve faces a delicate balancing act in addressing the economic slowdown while being mindful of still-elevated inflation levels.

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https://www.kitco.com/opinion/2024-08-02/labor-market-shock-implications-economy-and-federal-reserve-policy