Labour market cracks raise risk of hard landing

The sharp slowdown in payrolls in July and further rise in the unemployment rate cast doubt on the Fed’s argument mid-week that it is still too soon to loosen policy. We now expect 25 bp cuts at each of the remaining three meetings this year and will be watching for signs that a larger 50 bp move could be on the cards, although that would be dependent on the economy and labour market weakening at a faster pace than we forecast.