Sonders believes that another weak jobs report would reinforce the case for an interest rate cut in September.
As Wall Street anxiously awaits the release of the Federal Reserve’s preferred inflation gauge, the Personal Consumption Expenditures (PCE) index, Charles Schwab’s chief investment strategist, Liz Ann Sonders, reportedly expects the next jobs report to determine the central bank’s monetary policy direction.
In an interview with Yahoo Finance on Friday, Sonders indicated that another weak jobs report, similar to the one for July, would strengthen the case for an interest rate cut in September.
“I think that if we get another jobs report that’s akin to what we saw last month–weak at the headline level, but significant revisions on the downside–I think that cements the case for the Fed moving in September,” Sonders said in the interview.
Sonders also called Fed Chair Jerome Powell’s Jackson Hole speech “dovish,” noting that the central bank’s framework change proposal would let inflation overshoot the 2% target. “They now concede that was probably not the right move. It was essentially the reason why the Fed was late in starting to raise rates in the aftermath of the spike in inflation in 2022,” Sonders added.
The July jobs report showed a lower-than-expected addition to nonfarm payrolls at 73,000. However, Bureau of Labor Statistics data also showed a downward revision of 258,000 jobs in June and May non-farm payrolls, resulting in a spate of sharp reactions from President Donald Trump and the subsequent firing of BLS Commissioner Erika McEntarfer.
Meanwhile, U.S. equities declined in Friday’s pre-market trade. At the time of writing, the SPDR S&P 500 ETF (SPY), which tracks the S&P 500 index, was down 0.31%, while the Invesco QQQ Trust (QQQ) declined 0.53%. Retail sentiment around the S&P 500 ETF on Stocktwits was in the ‘bullish’ territory.
The iShares 7-10 Year Treasury Bond ETF (IEF) was flat at the time of writing.
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