Weak jobs report could support 100 bps worth of cuts by year end: Economist

Neil Dutta, Renaissance Macro Research head of economics, joins Josh Schafer and Madison Mills on Market Domination Overtime to discuss his stance that the Federal Reserve should deliver two 50 basis point cuts to end 2024.

“The call on [two] 50 [basis point cuts] is really a call on the jobs number clunking between now and the November FOMC meeting, I don’t think it’s a particularly high threshold. The momentum under the labor market is clearly softening,” Dutta says, nodding to the labor market differential and quit rate data.

“I think the direction of travel, frankly, is clear. And in my mind, it means the Fed’s still a little bit behind even after doing 50. Now, I think the good news is, is that there’s very little doubt in my mind that if you saw a weak jobs number, that would kind of, you know, lead to this sort of moment that would probably get the Fed to be to take a more aggressive approach to getting back to neutral.”

“I think it’s important to think about inflation as a process, and it is a process outside of commodities. And the fact that unit labor costs are so low really begs the question as to where the inflation is going to come from.”

Dutta notes that for the upcoming jobs report, “you have a lot of potential distortions,” given the ongoing port strike and the impact of Hurricane Helene. He says, “I think that the optics of not doing something big after a very weak number would be very challenging for them to communicate.”

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This post was written by Naomi Buchanan.