US Employment Data and Fed Cuts

Recent employment data from the ISM index indicates a noticeable decline in economic performance, with the index showing a drop of approximately six points compared to last month. This trend suggests a potential softening in the labor market, raising concerns about a shift from a previously anticipated soft landing to a more negative outlook. Analysts note that the increasing likelihood of the Federal Reserve cutting rates as early as September reflects a change in market sentiment, with options markets now pricing in multiple rate cuts in the coming months. If upcoming payroll numbers continue to support this weakening narrative, the Fed may have to consider more aggressive reductions, possibly even a 50 basis point cut.