August Employment Report Likely Seals September Rate Cut

A pronounced cooling in U.S. job growth this summer has likely set the stage for the Federal Reserve to trim interest rates by a quarter point at its meeting in two weeks. Chair Jerome Powell has emphasized that a material slowing in the labor market would justify easing, and the August data point to a clear downshift from the start of the year.

U.S. Labor Market Loses Momentum

August payrolls rose by just 22,000, underscoring a notable deceleration. Earlier months were revised lower, including June, which now shows a net loss of 13,000 jobs—the first monthly decline since late 2020. The combination of softer hiring, rising unemployment among both younger and older workers, and easing wage pressures indicates labor-market demand and supply are cooling in tandem.

Market expectations have shifted accordingly. While a quarter-point cut is widely anticipated, some traders see an increased chance of a larger move if subsequent data reinforce the slowdown. The Fed’s challenge is to support the economy without reigniting inflation, which has moderated but remains above target on some measures.

Healthcare Hiring Cushions the Slowdown—For Now

Healthcare and social assistance continue to be a bright spot, propping up overall job gains even as broader hiring wanes. However, the sector’s ability to carry the labor market may be limited. Policy shifts, such as potential Medicaid changes, could temper demand, and there’s a risk that preliminary estimates are overstating healthcare’s contribution to job growth.

ECB Set to Hold, Guidance Likely Limited

The European Central Bank is expected to keep rates unchanged for a second straight meeting, offering minimal clues about the timing of its next move. With inflation having fallen significantly from its double-digit peak in 2022, policymakers have repeatedly said they are in a “good place.” Even so, they must balance disinflation against lingering growth risks and the potential for renewed price pressures.

Japan: Political Flux, Market Jitters—and a Stock Rally

Leadership changes in Japan extend a period of political uncertainty that could unsettle government bonds or the yen. Equities, however, have taken the turmoil in stride, with the benchmark index pushing into record territory as investors focus on corporate reforms and resilient earnings.

Germany’s Output Rebounds Despite Export Weakness

German industrial production rose 1.3% in July from the prior month, the first increase since March, even as exports to the U.S. slumped. A revision narrowed June’s decline to 0.1% from a previously reported 1.9% drop, suggesting the industrial sector remains more resilient than earlier data indicated.

Tariff Fight Puts Refunds on the Table

After a federal appeals court struck down many tariffs from the last administration, U.S. importers are preparing refund claims that could total in the millions for individual firms if higher courts ultimately uphold the ruling. The case is expected to progress to the Supreme Court, leaving companies weighing documentation needs and timelines as the legal process unfolds.

Energy Policy Shifts and Industry Bets

Oil and gas executives who backed a pro-fossil-fuel agenda are seeing policy momentum in their favor, including broader access to federal lands and waters for drilling, approvals for additional natural-gas export capacity, and proposals to roll back environmental rules. The expected impact is a more favorable investment environment for hydrocarbons, with potential headwinds for some renewable projects and electric-vehicle adoption depending on final legislation and regulations.

Homeowners Sit on Big Equity, But Strategy Matters

Long-time homeowners are sitting on sizable gains as U.S. home prices have roughly tripled from mid-2000 to mid-2025. Nearly half of owners have lived in their homes for more than 15 years, and about one-quarter for over 25 years. A typical buyer from 2005 has seen values rise around 90%, boosting equity by more than $200,000. In today’s market, selling successfully often requires starting preparations earlier, sharpening pricing strategy, and addressing repairs before the peak spring season.

BOE May Wait Until Year-End for Next Cut

The Bank of England is widely expected to delay another rate reduction until December. After trimming its benchmark to 4.00% last month but striking a cautious tone on inflation, officials may prefer to see the government’s late-November Budget and additional economic data before moving again.

Global Snapshots

• Canada shed jobs for a second consecutive month in August, pointing to broader labor-market softness beyond industries directly affected by tariffs or trade uncertainty.
• Japan’s economy grew faster than initially estimated in the second quarter, marking a fifth straight quarter of expansion.
• China’s exports rose 4.4% year over year in August, slower than July’s pace and below expectations, as the boost from earlier trade de-escalation faded.

What to Watch Next

• Federal Reserve meeting in two weeks for a likely quarter-point rate cut, with attention on the statement and projections for clues on the path beyond September.
• ECB communications for any subtle shifts in language on inflation risks and growth.
• Incoming U.S. labor and inflation readings that could influence the size and pace of further Fed easing.
• Legal developments in the tariff cases that may reshape costs and strategies for importers.