US Employment Data Falls Short of Expectations, Raising the Chances of a Fed Rate Cut in September

The chance of the US Federal Reserve cutting interest rates in September has significantly increased. However, financial experts are keeping a close eye on the weaker-than-expected employment data.

The latest US employment data has shown weaker-than-expected job growth, increasing the likelihood of the Federal Reserve cutting interest rates in September.

According to the report by the Bureau of Labor Statistics, non-farm payrolls rose by an average of 818,000 fewer jobs year-over-year from March 2023 to the same month of 2024, indicating a 0.5% decrease between the two periods. Total employment in the private sector also fell by 0.6%, translating to 819,000 fewer jobs.

The steepest decline was observed in the professional and business services sector, which experienced a negative 1.6% growth, adding up to 358,000 fewer jobs. The leisure and hospitality and manufacturing sectors followed closely, losing 150,000 and 115,000 jobs, respectively.

While the numbers generally aligned with analysts' forecasts, they quashed expectations of a significant recovery in the job market this year. The weaker-than-expected employment data provided an opportunity for the Republican party to criticize the Biden administration's economic policies, dubbed "Bidenomics."

The report also comes as the Fed is widely expected to cut interest rates again next month. Despite the upbeat tone, the central bank's chair, Jerome Powell, hinted at an upcoming rate decrease in a speech at the Jackson Hole event on Friday.

At this point, analysts are expecting a series of interest rate cuts to 3.7% this year, followed by potential 4.5% cuts in 2025. Their projections are mainly influenced by the upcoming US presidential election in November.

In the political arena, the Democrats are considering a potential shift in their perspective regarding cryptocurrencies and digital assets. However, the Republicans, led by presidential bet Donald Trump and vice presidential candidate JD Vance, are set on halting the federal government's "unlawful and un-American crypto crackdown" of the crypto market.

The impact of an interest rate cut on Bitcoin (BTC) and the crypto market as a whole is complex, especially given the weaker-than-expected employment data. However, the positive news from the Fed has contributed to the crypto asset's key recovery to $64K this Saturday morning (at UTC standard).

To establish a more precise short-term estimate of Bitcoin and crypto prices, one must consider the sentiment of the equity market and the strength of the US dollar. If BTC manages to hold its own against dollar devaluation and fixed-income investments, its narrative as an inflation hedge could attract retail and institutional investors.

On the other hand, if the Fed fails to achieve a soft landing with the rate adjustment, it could trigger a risk-off sentiment in the equity markets, potentially dampening investor risk appetite and driving them away from high-risk assets like Bitcoin and crypto. Under such a scenario, members of the crypto community should prepare for a possible breach in BTC's critical support level.

Moreover, the flight to safety may not directly benefit Bitcoin and other digital assets if cautious investors choose tangible investments like gold or real estate instead.

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