Everyone looks at Jerome Powell as warnings are blinking for the American economy

The Federal Open Market Committee (FOMC) had previously left rates unchanged at a range of 4.25% to 4.50% at its July meeting, despite internal disagreements, the growing signs that the economic conditions justified a more dominant approach and the growing pressure of President Donald Trump on the president of the Fed, Jerome Powell. The July job report, of course, quickly changes the image.

The Labor Department declared a gain of only 73,000 non -agricultural payroll jobs in July, well below consensual forecasts. More disturbing were the significant decreased revisions for May and June, which reduced 258,000 jobs combined compared to previous estimates and reduces the average gains of these months to less than 20,000 jobs per month. Although the July number does not give the crisis alone, consecutive weakness and important revisions have expressed the concerns of investors concerning the potential cracks that are formed on the American labor market. Powell has repeatedly stressed the balance between labor supply and demand, and said that the unemployment rate is “the key indicator to be monitored”. The unemployment rate of July reached 4.2%, just under a 12 -month summit, providing additional softening evidence.

The market reaction was rapid. Stephen Brown, deputy chief economist in North America for the Economics Capital Research Cabinet, called it “payroll of pay”. He noted an immediate change in the markets, which resumed the probability of a drop in the rate from September to 85%, a leap of less than 50% before the data on jobs, because the long -term traders bet that the Federal Free Market Committee will have to respond to the growing evidence of economic softening.

“The July job report greatly contributes to providing proof of a lower labor market which the Fed needs to justify the reduction in interest rates in the face of higher target inflation,” said Brian Rose, Main American economist at UBS Global Wealth Management, in a declaration to Fortune Intelligence. Rose noted that GDP data had shown that the growth of the economy slows down at an annualized rate of 1.2% in the first half of 2025, well below the longer -term trend rate of 2.0%. “We are also expecting soft data in the second half of 2025. This should help compensate for part of the inflationary pressure driven by tariff increases,” he added.

Other recent data strengthen the image of an under -tensioning economy. Investigation indicators such as the ISM manufacturing employment index fell further in July, while commercial capital expenditure measures only recovered modestly after the disruption after April “Liberation Day”. Meanwhile, President Trump’s new tariff measures increased import costs, adding to inflation prospects.

Diabolically mixed signals

The diving of the July payroll, in terms of the disruptive “liberation day” in April, may not yet announce a deeper job slide, suggest other data. Brown noted that the first unemployment complaints were reduced to 218,000 last week, and continuous complaints decreased regularly since the culling in early June.

Analysts expect Powell to use Jackson Hole’s next economic symposium, which will be held from August 21 to 23, as the opportunity to point out the Central Bank’s desire to act if the weakness of the labor market persists and the more important inflation effects of prices cannot be materialized.

Rose’s reference scenario now sees the Fed recovery rate drops at its September meeting and continues to reduce 25 base points at each meeting until January, reducing the rate of federal funds from a full point to bring borrowing costs to an “almost neutral” level.

“Given this morning data, Powell could be willing to leave a clue that the Fed leans towards a September Cup,” said Rose.

For this story, Fortune Used a generative AI to help an initial project. An editor checked the accuracy of the information before the publication.