US jobless claims for the week ending on August 10 came in at 227,000, much less than Wall Street expected. The data signals the labor market has not slowed down as much as some previously thought. If the Federal Reserve decides to cut rates in September, could that be a headwind or tailwind for the labor market? Bank of America senior US economist Aditya Bhave joins Catalysts to give insight into the current landscape of the job market and health of the overall economy. Bhave begins with: “We maintained the view that the labor market is normalizing. We’re not heading into a recession, and that the July data were somewhat idiosyncratic. The recent decline in jobless claims, it’s not just one week, it’s the last couple of weeks, that’s been very encouraging.” In terms of a rate cut from the Fed, Bhave believes : “We are of the view that the data flow, both on inflation, which was just a little bit stickier than the Fed would like in housing as well as activity, labor market, all of that suggests that the Fed can cut and it will cut in September, in our view, by 25 basis points. But there isn’t a need right now for super-sized cuts or accelerated cuts, namely once per meeting.
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