A jumbo US rate cut of 50 points in September is back on the table, and possibly several cuts in a quick succession as the Federal Reserve is forced into a screeching hand-brake turn.

Markets have been caught off guard by a drastic revision of non-farm payrolls, the worst miss since the Lehman crisis. Labour economists can justifiably say “I told you so”. They have been warning all year that instant headline figures do not catch early signs of trouble in the US jobs market when the economic cycle rolls over. You have to look under the bonnet.

The “flash crash” on markets earlier this month could be a sign of things to come. Credit: AP

“The Fed is late, and is now going to have to scramble, in an undignified manner,” said Paul Donovan, chief economist at UBS wealth management.

One has to sympathise with Fed chairman Jay Powell as he descends on Jackson Hole this Friday for the annual ritual of marshmallow roasting and campfire songs. The institution has been misled once again by unreliable data. The gain in non-farm payrolls in the twelve months to March was 818,000 less than previously stated. The enormous error flattered Bidenomics and overstated the US boom. We should assume that GDP growth will be revised down as well — unless productivity has magically surged, which I doubt.

Citigroup says the economy may already be well into recession. It has pencilled in double-decker cuts in both September and early November.

The start of a US rate-cutting cycle is an intoxicating tonic for global equities, small caps, emerging markets and commodities, provided it comes with a soft landing. It is a different story if a slowdown flips into a hard landing. Portfolios are cut to ribbons once that is allowed to happen.

“We say sell the first cut........

© Brisbane Times