By Morgan Stanley chief US economist Seth Carpenter

The August US nonfarm payrolls report came in softer than we expected, but not by enough to change our baseline view on the Fed—especially because recent spending and income data suggest continued momentum in the economy. Although we are still looking for the Fed to start a series of 25bp rate cuts at the upcoming meeting, bigger cuts are on the table, because our read of the jobs report sees heightened risks that the slowdown will be more than our baseline assumes. So, we are constructive, with a downside skew to risks … and all forecasts have risks. More soft payrolls prints, weaker spending, or very soft inflation will keep a 50bp cut squarely in play.