Friday morning's weak jobs report has led to a selloff on Wall Street: The Dow plunged more than 900 points, or 2.3%, in late-morning trading, while the S&P 500 was off 2.2% and the tech-centric Nasdaq was down 2.4%. In fact, the benchmark S&P was on track for its worst day since 2022, per the AP. The report showing that hiring has slowed much more than anticipated followed a batch of weaker-than-expected reports on the economy from a day earlier—including worsening US manufacturing activity, which has been one of the areas hurt most by high interest rates. Just a few days ago stock indexes jumped to their best day in months after Fed Chair Jerome Powell gave the clearest indication yet that inflation has slowed enough for rate cuts to begin in September.
Now, worries are rising that the Fed kept its main interest rate at a two-decade high for too long in its zeal to stifle inflation. A rate cut would make it easier for US households and companies to borrow money and support the economy, but it could take months to a year for the full effects to filter through. "The Fed is seizing defeat from the jaws of victory," said Brian Jacobsen, chief economist at Annex Wealth Management. "Economic momentum has slowed so much that a rate cut in September will be too little and too late." In his view, the central bank will have to go bigger than the traditional quarter-point cut to avoid a recession.
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