Alarming jobs report makes potent case for the Fed to cut interest rates

Data: FactSet; Chart: Axios VisualsAt the Federal Reserve policy meeting that concluded Wednesday, governors Christopher Waller and Michelle Bowman dissented from the decision to leave rates unchanged, believing that a rate cut was justified. It looks like they had a point.The intrigue: At 8am ET Friday morning — half an hour before the jobs report — Waller and Bowman issued statements explaining their dissents.It's clear they were worried about exactly the kind of labor market cracks that exploded into plain view with the new revisions.What they're saying: Waller's statement says that "while the labor market looks fine on the surface, once we account for expected data revisions, private-sector payroll growth is near stall speed, and other data suggest that the downside risks to the labor market have increased.""With underlying inflation near target and the upside risks to inflation limited, we should not wait until the labor market deteriorates before we cut the policy rate," he continued.Bowman said that "the labor market has become less dynamic and shows increasing signs of fragility."What's next: The odds of a rate cut at the next Fed policy meeting in mid-September skyrocketed after the weak numbers, and bond yields fell.The likelihood was 38% Thursday, per the CME FedWatch tool, but went up to 80% Friday.The two-year Treasury yield fell a whopping 0.19 percentage point.The bottom line: Waller and Bowman didn't win the argument at the Federal Open Market Committee table this week, but the latest data only bolsters their concerns and means they're likely to win the day when the Fed next meets.

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