The US economy is worse than the idea that 1.2 million jobs are fewer – what does that mean for the Fed?

Job growth tanking and the economy wobbling put pressure on the Federal Reserve to begin cutting interest rates. The market is hoping to cuts at each of the remaining three meetings this year.

The Bureau of Labor Statistics reported Tuesday that the economy added 911,000 fewer jobs than previously reported in the year before March 2025. A downward revision of that report since the cut date suggests that the decline in salary growth is in fact about 1.2 million over the past 16 months.

This will surely catch the attention of the Federal Open Market Committee when they meet next week, and will fire recurring claims that President Donald Trump’s central bank is “too late” to make policy adjustments.

“If Fed officials had made that data available in real time, policy rates would be lower than they would be today,” wrote Andrew Hollenhorst, an economist at Citigroup, referring to the revised BLS “benchmark” pay.

Hollenhorst said that when FOMC releases its decision on September 17th, the data could actually “justify” the half-percent point cut of the jumbo. However, he shows that Chair Jerome Powell is easy to build a consensus around the “quarterpoints” rate reduction, including the possibility of October, as well as the rate reductions will continue at upcoming meetings.

Market expectations have changed particularly significantly as signs of trouble have been built around employment.

Traders are currently priced at a 100% chance that the Fed will fall by a quarter point next week, as well as allowing for a small chance of a half-point cut. According to CME Group’s FedWatch tool, they are currently being sluggishly cut in each of the remaining three meetings. Gauge uses the price of a 30-day Fed fund futures contract to determine the market-proven odds of interest rate movement. Just a week ago, the market had only been allocated a small opportunity for three cuts this year.

The Fed is not market-bound, but as part of its data dashboard, it closely monitors rate expectations.

“There’s little work in the US economy right now, and that’s been the case for a long time,” said Heatherlong, now the chief economist of the Navy Federal Credit Union and previously Fed reporter for the Washington Post. “The Federal Reserve will need to cut interest rates in September, October and December, and the White House will need to quickly complete trade agreements with China. Companies will not reinvest and hire more people until they are more certain.”

Certainly, Fed officials may feel intentional in their actions as economic data is still muddy and subject to wind changes from Trump’s tariffs.

Furthermore, current data can exaggerate labor market problems.

Goldman Sachs, for example, disputed the revision of its benchmark payroll, saying that the total reductions based on the company’s own model and high-frequency data are like 550,000, or a little lower than the previous year. The company further said the BLS revision “provides limited information on the current state of the labor market.”

However, the report follows the news that non-farm payroll calculations rose by just 22,000 in August. Furthermore, a New York Fed survey found that there were few emotional records among workers who believe they could find another job if they lose their current position. Other studies also show increased concern.

From the White House, data has reignited the demand for rate reductions.

“Jerome has officially exhausted the excuses, just like Powell, he’s “too late” and now he has to cut his fees,” White House press chief Karoline Leavitt said in a statement.