Markets brace for three rate cuts this year after historic BLS revision and weak hiring numbers
The US Bureau of Labor Statistics (BLS) revised its estimates on Tuesday, showing the economy added 911,000 fewer jobs over the 12 months ending in March 2025 than previously reported.
According to ABC News, the reduction appears to be the largest revision ever recorded and suggests payroll growth has fallen by about 1.2m over the past 16 months.
Markets quickly shifted expectations.
As reported by CNBC, traders are now assigning a 100 percent chance of a quarter-point Federal Reserve rate cut at next week’s meeting, with a slight possibility of a half-point move.
The CME Group’s FedWatch tool also shows markets are firmly pricing in cuts at each of the three remaining meetings this year.
Political pressure has intensified.
White House press secretary Karoline Leavitt said the downward revision “proved that President Trump was right: Biden’s economy was a disaster and the BLS is broken.”
She added that Jerome Powell has “officially run out of excuses and must cut the rates now,” according to CNBC.
Citigroup economist Andrew Hollenhorst wrote that the BLS revisions highlight how “policy rates would be lower today” had the data been available in real time.
He added that the figures could justify a half-point cut, but he predicted Powell will push for a quarter-point reduction while signalling that more easing could come in October.
The weak jobs picture extends beyond revisions.
CNN reported that nonfarm payrolls grew by only 22,000 in August, while unemployment rose to 4.3 percent, the highest since 2021 but still below the historical average of 5.7 percent.
A New York Fed survey also found workers placed just a 44.9 percent probability on finding a new job if they lost their current one, the lowest reading since the survey began in 2013.
Economists remain divided on the scale of the slowdown.
Heather Long, chief economist at Navy Federal Credit Union, said the Fed “needs to cut interest rates in September, October and December” and urged the White House to quickly finalize a trade deal with China.
Goldman Sachs disputed the magnitude of the BLS revision, estimating the shortfall at about 550,000 jobs and arguing the data “provide limited information about the current state of the labour market,” though it acknowledged conditions have “softened materially.”
The political fallout has been pronounced.
Trump dismissed BLS Commissioner Erika McEntarfer in August following a weak jobs report, claiming without evidence that the agency manipulated data.
McEntarfer, a Biden appointee, said serving as commissioner had been “the honour of my life,” while former BLS commissioner William Beach condemned the firing as “totally groundless” and warned it undermines the Bureau’s mission, according to ABC News.
Broader indicators show mixed signals.
Inflation measured by the Consumer Price Index was 2.7 percent in July, below the long-term average of 3.6 percent, though New York Fed surveys suggest consumers expect it to rise to 3.2 percent over the next year as tariffs continue to push up costs.
The S&P 500 has hit record highs this year, fuelled by investor expectations of Fed easing, as reported by CNN.
Markets are also watching long-term yields.
Bloomberg reported that 30-year US Treasury yields approached 5 percent in mid-July before retreating to around 4.7 percent as weak labour market data reinforced expectations of a rate cut.
Angel Ubide, head of economic research for fixed income and macro at Citadel, described the economy as being “on the good side of a fragile equilibrium,” but cautioned that any rapid rise in yields above 5 percent “could be scary for risk assets.”
Currency markets have also reacted.
The US dollar has lost about 8 percent this year, weighed down by fiscal concerns, tariffs and investor diversification away from US assets, Bloomberg reported.
Ubide said this shift “is going to take years to play out” as large institutional investors move slowly.
Some analysts see signs of resilience.
Morgan Stanley economists argued the US economy has been in a “rolling recession,” with certain sectors slowing while others held steady, but is now shifting toward a “rolling recovery.”
They said stronger earnings growth potential and improved consumer and corporate confidence support the view that the worst may be over, according to CNN.
Still, not all experts share that optimism.
Alexander Field, an economics professor at Santa Clara University, said “there is simply no plausible case today that the economy is doing really well now.”
