Investors got a mixed picture of the labor market as the ADP National Employment Report saw private-sector job openings fall to their lowest level since 2021 while initial jobless claims came just slightly under expectations.

As investors brace for Friday's critical jobs report from the month of August, Glassdoor lead economist and senior manager of data science Daniel Zhao joins Morning Brief to discuss the state of the labor market and what it could signal for the Federal Reserve's first interest rate cut.

"It's important to look at the labor market data holistically. And even though we've seen some ups and downs in the data... I think the trend is still one of a cooling labor market, one that is softening and even weakening. And the fact that we have some data points that are even a little bit weaker than that, it just goes to show that the margin of error is very slim for the Federal Reserve as they try to get us towards that soft landing," Zhao explains.

He explains that while the labor market is cooling, "the question really is have we gone too far?" He notes that employee sentiment is "extremely weak," and that less than half of employees have a positive business outlook for their employers. In addition, employee burnout is at its highest levels ever while hiring is very slow, making it an overall "stressful" environment for workers.

"It's very difficult for folks who have been laid off to break back in. And it's also feeling like folks have gotten stuck for the people who are in a job, they aren't really seeing those opportunities for advancement, either internally or externally," Zhao adds.

As the Federal Reserve heads into its September meeting, Zhao expects a 25-basis-point cut. He expects Friday's jobs report to support this narrative as he estimates a rebound from July's print. However, if it comes in much worse than expected, a 50-basis-point cut would likely be considered by the Fed.

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This post was written by Melanie Riehl