Core Viewpoint - The sudden cooling of the U.S. job market is prompting Wall Street traders and economists to recall the Federal Reserve's policy path from last summer, raising expectations for potential interest rate cuts in September [1][5]. Employment Data Overview - The latest non-farm payroll data for July shows a significant slowdown in the U.S. labor market, with only 73,000 new jobs added, far below market expectations. Additionally, the employment figures for May and June were revised down by a total of 258,000 jobs [2][4]. - The private sector added only 3,000 jobs in June and 83,000 in July, while the manufacturing sector has seen job losses for three consecutive months, averaging a decrease of 13,000 jobs per month [2]. Unemployment Rate and Labor Participation - The unemployment rate increased from 4.117% to 4.248%, with household employment surveys indicating a reduction of 260,000 jobs. The labor force participation rate has declined for three consecutive months, from 62.3% to 62.2% [4]. - The average job growth over the past three months is only 35,000 jobs, with potential revisions indicating that actual job growth may be negative [4]. Market Reactions and Federal Reserve Expectations - The unexpected weakness in the employment report has sparked discussions about the Federal Reserve potentially repeating last year's scenario of holding rates steady in July and then implementing significant cuts in September. The probability of a rate cut in September has surged from 38% to over 70% [5][6]. - According to CME data, the likelihood of a rate cut in September has risen to nearly 90%, with a 89.6% chance of a 25 basis point cut. However, the market currently sees no chance of a 50 basis point cut [6]. Inflation Concerns and Economic Outlook - A key difference from last year is the inflation concerns stemming from the Trump administration's tariffs, which could complicate the Federal Reserve's decision-making process [7]. - Analysts suggest that the Federal Reserve must determine whether the economic slowdown is a temporary phenomenon or indicative of a more profound deterioration. They expect that if the labor market remains weak, rates could be lowered below 3% next year [8].