U.S. Jobs Report Fuels Talk of Larger Fed Rate Cut

A weaker-than-expected August jobs report has strengthened expectations for a Federal Reserve rate cut later this month, with some analysts now suggesting a 50-basis-point reduction could be on the table, rather than the previously assumed 25.

Nonfarm payrolls increased by just 22,000 in August, the Bureau of Labor Statistics reported Friday, well below forecasts of 75,000 and July’s revised 79,000 gain. July’s figures were adjusted up by 6,000, while June’s tally was revised down by 27,000 to negative 13,000—the first negative monthly print since the pandemic lockdowns of 2020.

The unemployment rate rose to 4.3%, matching expectations and edging higher from 4.2% in July. Average hourly earnings climbed 0.3% for the month and 3.7% year-over-year, both in line with estimates.

Markets reacted swiftly. Bitcoin gained about $500, trading near $112,800 shortly after the release. Gold surged more than 1% to a record $3,644 per ounce. U.S. equity futures extended modest gains, the dollar slipped, and the 10-year Treasury yield dropped six basis points to 4.11%.

Pressure Builds for the Fed

Bitcoin, despite Friday’s bounce, has been under sustained pressure since peaking above $124,000 in mid-August, sliding as low as $107,400 earlier this week. Even Fed Chair Jerome Powell’s dovish shift at Jackson Hole on Aug. 22 produced only a fleeting rally.

Until now, the possibility of a 50-basis-point rate cut at the Fed’s September meeting had scarcely been considered. But the latest labor-market weakness could push policymakers to weigh that option. Historically, looser monetary policy has been viewed as supportive for risk assets, including bitcoin. If even a larger-than-expected cut fails to lift sentiment in crypto, however, bullish investors may need to reassess their outlook.