After a softer June jobs report, asset managers are optimistic that the Federal Reserve will cut rates this year, but differ on the timing.
Bryce Doty, senior vice president and senior portfolio manager at the $17 billion Sit Investment Associates, said his current base case has the Federal Reserve cutting rates by 50 basis points, but not until after the presidential election in November.
"Given the downward revisions to previous job estimates combined with a slight increase in the unemployment rate to 4.1%, the labor market appears to be weakening,” he said. “We expect yields to move lower as this report keeps the Fed on schedule to cut rates this year."
However some other experts see a rate cut coming sooner.
Jeff Schulze, managing director and head of economic and market strategy at ClearBridge Investments, said the latest jobs data suggests the labor market is “nearing equilibrium.”
“Although the headline number was strong, the details were more mixed with large negative revisions to prior months that bring the three-month average in job creation to 177,000, the slowest pace since January 2021,” he said. “Just as one cool inflation print does not make a trend, neither does this one softer jobs report. However, the combination of this morning’s data along with a grinding trend higher in jobless claims should bolster the case for the Fed to kick off the long-awaited rate cutting cycle in September, which remains our base case.”
ClearBridge has $187.9 billion in assets under management.
The U.S. economy created 206,000 jobs in June, below the downwardly revised figure of 218,000 from May, but also above expectations, the U.S. Bureau of Labor Statistics reported on July 5. The unemployment rate clocked in at 4.1%, up slightly from 4% in the prior month.
