The August jobs report came in weaker than expected last Friday, leaving investors wondering how the labor print, along with upcoming inflation data releases this week, could impact Federal Reserve policy and the broader economy. To discuss the economic outlook, Morningstar Chief US Economist Preston Caldwell joins Catalysts.
Caldwell believes the Fed will continue cutting debt charge rates at every meeting for the remainder of 2024, though he states a 50-basis-point cut is “unlikely.” He notes that bond yields (^TYX, ^TNX, ^FVX) have already started to decline in anticipation of a rate cut, which “will already start to work its way into the economy.” With the labor industry cooling, Caldwell says this has begun to frontload the impact of monetary policy easing, “reducing the need for the Fed to hurry.”
Despite these developments, Caldwell does not foresee a recession or a labor industry collapse. However, he does anticipate a “mild slowdown,” projecting that GDP (gross domestic product) expansion will trend down nearly 1.5%.
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