August 31, 2025

Get ready for a blockbuster moment in the US economy next Friday! The US labor market report hitting the streets will show how strong jobs really are. This report is like a crystal ball for investors, testing whether the Federal Reserve will soon cut interest rates again — news that has already been pushing US stocks to dazzling record highs. Last month, the US surprised everyone with weak job numbers. Only 73,000 new jobs were created in July, far less than most experts expected. This chilly data had people buzzing that the Fed might lower rates at their September meeting to keep the economy from slowing down, even while inflation remains a worry. Jack Janasiewicz, lead portfolio strategist at Natixis Investment Managers Solutions, says, "Lower rates probably trump a modestly slowing labor market, and that probably puts a floor underneath the economy and ... the stock market." In simple words, cheaper borrowing costs could keep the economy afloat even if jobs growth cools. US stocks have been on fire this year, bouncing from April lows and shaking off tough times like President Trump's trade tariffs. Tech stocks, especially those involved in artificial intelligence, have been flying high. Though there was a dip on Friday, mainly from tech stocks linked to AI, the S&P 500 still ended August up nearly 2%, bringing its year-to-date gain to about 10% — just shy of all-time highs. But beware: September is known as the trickiest month for stocks. Data shows the S&P 500 often falls this month, with an average drop of 0.8% over the past 35 years. So, the upcoming jobs report will set the tone as September's first big test. Experts expect a modest gain of around 75,000 jobs in August. Alex Grassino, global chief economist at Manulife Investment Management, expects to see signs showing "the US labor market has cooled." If the August numbers stay weak, it could push the Fed closer to cutting rates soon. Fed Chair Jerome Powell has already hinted risks are rising in the job market. Markets are pricing in an 89% chance of a 25 basis point rate cut at the Fed’s September 16-17 meeting, according to data from LSEG. Drew Matus, chief market strategist at MetLife Investment Management, adds, "It would take very broad-based strength in the report in order to get the Fed to rethink the idea of moving rates lower." He believes even an okay report won’t stop the Fed from cutting rates. The special twist to watch for is how much the Fed cuts after September — futures suggest more than two standard cuts by December are expected. Adding to the drama is President Trump’s recent move to fire Fed Governor Lisa Cook. She’s now suing, saying Trump has no right to remove her. This clash raises fresh worries about the Fed's independence and whether politics might interfere with its money policies. Grassino says, "A lot of things that traditional market participants would have taken as a given are being questioned." Markets may have already priced in these risks, but the tension adds more excitement and uncertainty. So, what does this mean for investors and the economy? The upcoming jobs data will either calm nerves or stir the pot, influencing interest rates and stock prices. It’s a must-watch show for anyone following the rollercoaster ride of the US economy and markets!

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Tags: Us labor market, Federal reserve, Interest rates, Stock market, Jobs report, Economic outlook,