Swiss Patek Wealth Management's senior economist, Cui Xiao, predicts that the US labor market will experience a mild adjustment. The recent unemployment rate has risen from 3.4% in April 2023 to 4.2% in August 2024, primarily driven by supply rather than demand factors. She stated that the recent increase is due to labor entering the market and not immediately finding employment, reflecting weak labor market demand. She expects the policy normalization cycle to begin in September, November, and December of this year, with a 25 basis point rate cut each time, unless a major financial shock occurs. With inflation concerns easing and the labor market re-balancing, the current monetary policy stance of the Federal Reserve is considered too tight. The soft labor demand is not enough to absorb the temporarily increased labor supply, which is a slow-developing issue that the Federal Reserve may address by easing policy. However, the risk of further easing policy is increasing, which means there is a possibility of larger rate cuts, and policy rates may return to neutral levels more quickly. If evidence of weak labor demand or increasing layoffs emerges, the Federal Open Market Committee will respond strongly. She notes that the current low recruitment and low layoff employment environment may be in a fragile balance because it makes the labor market more vulnerable to shocks. Additionally, even with strong labor demand, the volatility and noise in monthly employment growth may sometimes result in a significant decline in wages. A major concern is whether weak recruitment will lead to labor cost cutting and widespread layoffs, triggering a negative feedback loop between job reductions and expenditure reductions that will make it difficult for policymakers to counteract. Currently, the federal funds rate futures market expects a rate cut of around 32 basis points in September, and approximately 40 basis points in November and December, reflecting the market's belief that there is a high likelihood of the Federal Reserve transitioning to larger scale rate cuts later on, and that concerns about economic growth may persist for some time.