July Fed cut is off the table and September's is now in question, says CFR’s Rebecca Patterson

Key Concepts:

• Jobs report analysis (headline vs. underlying data)
• Impact of jobs data on Federal Reserve interest rate decisions (July and September rate cuts)
• Economic bifurcation (working class vs. affluent, young vs. experienced job seekers)
• Fiscal package implications (social safety net, Medicaid work requirements, SNAP benefits)
• Consumer spending and its relationship to company revenues and stock market performance

Jobs Report Analysis:

• The market reacted positively to a better-than-expected jobs report.
• Rebecca Patterson notes that while the headline numbers are positive, a deeper look reveals some concerning trends.
• Private sector job growth was only 74,000, the slowest pace this year.
• Less than half of the industries in the report showed job growth, indicating a slowdown in the cyclical part of the economy.

Federal Reserve Interest Rate Decisions:

• The strong jobs report effectively removes the possibility of a July interest rate cut.
• Patterson believes even a September rate cut is questionable.
• The moderation of the labor market, without a significant downturn, is viewed as positive because it supports consumer spending.

Economic Bifurcation:

• The discussion highlights the existing economic divide between the working class/poor and the affluent.
• A growing bifurcation is noted between young job seekers (college graduates) and those struggling to find employment.
• The latest jobs report exacerbated this trend.

Fiscal Package Implications:

• The impending passage of a fiscal package is discussed.
• The package includes changes to the social safety net, potentially impacting lower-income households.
• Medicaid work requirements in the Senate bill are designed to take effect after the midterm elections.
• Features like SNAP food assistance could be reduced or eliminated this year.
• Younger individuals will face challenges with student loan repayments and a difficult job market.

Consumer Spending and Stock Market:

• As long as consumers have incomes, they can continue spending.
• Continued consumer spending supports company revenues.
• The stock market benefits from strong company revenues.

Notable Quotes:

• "Markets move on. What's not priced in." - Rebecca Patterson, emphasizing the market's reaction to unexpected data.

Synthesis/Conclusion:

While the market is reacting positively to the headline jobs numbers, a deeper analysis reveals underlying weaknesses in the labor market and potential challenges for specific segments of the population, particularly lower-income households and young job seekers. The fiscal package's impact on the social safety net and student loan repayments could further exacerbate these challenges. The strong jobs data reduces the likelihood of near-term interest rate cuts, which is viewed positively as long as consumer spending remains robust.