US Federal Reserve officials are struggling to determine whether the labor market is slowing down or weakening as long-awaited cuts to benchmark interest rates are just a bit more than a week away.

The US unemployment rate is up and job openings are in steep decline, while job growth is slowing and the percentage of Americans either working or actively looking for work has remained flat for months. Yet joblessness remains historically low, employers still have more job openings than they did in the months before the pandemic, and about 1 million more prime-age workers — those aged 25-54 — have joined the domestic labor force through the first eight months of this year as nearly 1.5 million new jobs have been added.

The US jobs market is no longer as robust as in 2023, when 3 million jobs were created and unemployment fell to the lowest levels since the early 1980s, but it is also not cratering. The fragility of the US labor market has taken precedence for central bankers now that inflation appears to be veering steadily toward policymakers' 2% goal. Whether the Fed sees the jobs picture as stabilizing within pre-pandemic norms or careening toward an economic calamity will likely determine just how aggressively central bankers will cut interest rates this year.

"A big question is if the labor market is deteriorating or decelerating," said Shannon Grein, an economist with Wells Fargo.

The futures market sees higher odds of a 25-basis-point (bps) cut than a 50-bps reduction at the Fed's Sept. 18 meeting, according to the CME FedWatch Tool, which measures investor sentiment in the fed funds futures market. Still, nearly the entire market is betting the Fed will cut rates by at least 100 bps before the end of the year.

Those looking for insight into the Fed's rate-cut plans from the August jobs report came away disappointed as the Bureau of Labor Statistics reported Sept. 6 that there were 142,000 jobs created last month, nearly 20,000 below economists' expectations, yet unemployment fell to 4.2% from 4.3% in July, the highest level since October 2021.

"The good news: the August jobs report indicates the labor market's slowdown isn't as severe as the July report showed," said Nick Bunker, research director at Indeed Hiring Lab. "The bad news: the labor market is still slowing down."

The labor force participation rate — a measure of the population either working or seeking work — steadied at 62.7%, where it stood a month earlier and down from its pre-pandemic level of 63.1%. The participation rate for prime-age workers jumped to 83.9% from 82.5% in August 2019.

Meanwhile, job openings fell below 7.7 million in July, the lowest monthly level since January 2021, according to government data released Sept. 4.

There were just about 500,000 more job openings than there were unemployed Americans in July, the smallest gap since April 2021, when the number of unemployed last outpaced the number of open jobs.

While the number of job openings has steadily declined about 4.5 million from the peak in March 2022, job openings are still more than 600,000 above pre-pandemic levels as the overall labor force has grown by about 4 million.

"Relative to the overall civilian labor force or total employment, job openings are now exactly in line with where they were in 2019," said Aaron Terrazas, chief economist with Glassdoor.

The jobs market has been particularly strong for highly [educated] workers but softer for skilled workers, Terrazas said.

There were 449,000 job openings in the financial activities sector in July, down 73,000 from the peak of job vacancies in March 2022. By comparison, there were just under 1.03 million job openings in trade, transportation and utilities in July, down more than 1.12 million from March 2022.

"Regardless of the supply trends, what looks like a 'normalization' to many economists, feels like a loss of relative status for many workers and job seekers whose internal reference point is two years ago, not four years ago," Terrazas said.

For now, it appears the jobs market is nearing or at its pre-pandemic level of normalcy, said David Russell, global head of market strategy at TradeStation.

"Coronavirus was the most abrupt economic event in history, creating data anomalies that defy economic models," Russell said. "People shouldn't be surprised it took a few years to return to normal, but it seems that normalcy is now finally coming back."

As the Fed readies its rate cuts and the futures market speculates about where interest rates may be headed into 2025, it remains unclear if the jobs picture will start to resemble what it looked like in 2019, or if something entirely different is emerging.

"I don't think we're just shifting to a more normal market," said Guy Berger, director of economic research at the Burning Glass Institute. "If we were to stop here, I think you could make that case, but it looks like we're just moving past normal."