Core Viewpoint - The Federal Reserve is anticipated to cut interest rates by 0.25 percentage points to a target range of 3.75%-4.00% during its upcoming policy meeting, following a similar cut in September, marking the first reduction of the federal-funds rate this year [1][2]. Group 1 - The government shutdown has hindered the Fed's access to official economic reports, prompting officials to rely on private surveys, state data, and financial-market signals to inform their decisions [2]. - With a cooling job market and inflation remaining approximately one percentage point above the Fed's 2% target, officials are cautiously balancing their dual mandate, favoring a small pre-emptive rate cut in September to mitigate potential economic downturns [2][3]. - Investors are expected to focus on the tone of the Fed's press release and Chair Jerome Powell's post-meeting press conference, rather than the immediate policy decision, as they look for indications regarding the December meeting [3].

Core Insights - The U.S. job market is showing signs of cooling, with a modest addition of 80,000 jobs expected for August, a slight improvement from July's 73,000 [2] - The unemployment rate is projected to remain low at 4.2%, indicating a reluctance among employers to hire or fire [2] - The economy has generated an average of 85,000 new jobs per month in 2025, down from 168,000 in 2024 and 400,000 during the hiring boom of 2021-2023 [2] - A significant portion of new jobs this year has been concentrated in the healthcare and social assistance sector, which accounts for nearly 80% of private sector job growth [2] Labor Market Dynamics - The number of Americans applying for unemployment benefits has risen to the highest level since June, suggesting potential layoffs [2] - U.S.-based employers have announced over 892,000 job cuts through August 2025, surpassing the total of 761,000 for all of 2024 [2] - The Labor Department's revisions to previous job reports have raised concerns, with a reduction of 258,000 jobs from May and June payrolls [4] Data Collection Challenges - The response rate from companies to Labor Department surveys has declined from about 60% a decade ago to only 40% now, complicating data accuracy [4] - This issue is not unique to the U.S., as other countries, including the U.K., have faced similar challenges in collecting labor data post-COVID-19 [4]