US Job Market Update

Investing.com — The US economy added fewer jobs than anticipated in August, but the figures were an improvement from a revised July figure, according to Labor Department data. This data could influence the Federal Reserve’s upcoming policy decisions.

Nonfarm payrolls increased to 142,000 in August, up from a significantly downwardly revised 89,000 in July. Economists had expected a reading of 164,000, reflecting a rise from the initial July figure of 114,000.

The latest release also indicated the US unemployment rate at 4.2%, down from July’s 4.3% and in alignment with estimates.

Average hourly earnings growth rose to 0.4% after a contraction of 0.1% in July.

Analysts at Vital Knowledge noted, “The August jobs report isn’t as bad as feared, but it’s still pretty soft.”

Additional pre-report data revealed that US private employers hired the fewest workers since 2021 in August, while job openings fell to a 3-1/2-year low in July. However, concerns about the labor market’s decline were mitigated by a drop in jobless claims and growth in the services sector.

The nonfarm payrolls data will likely guide Fed Chair Jerome Powell’s strategy in shifting focus from inflation control to job loss mitigation. Powell mentioned in August that the “time has come” for a policy adjustment due to potential “downside risks” to the US job market.

Other Fed officials, including San Francisco Fed President Mary Daly, expressed similar views, emphasizing that an “overly tight” monetary policy could cause further job market decline.

According to the CME Group’s FedWatch Tool, analysts expect the Fed to announce a decrease in borrowing costs during its next gathering on Sept. 17-18. Current interest rates are between 5.25% and 5.5%, the highest in 23 years.

Post-release, there was a temporary uptick in expectations for a larger 50 basis-point rate cut, which later receded. Analysts at Evercore ISI suggested that while a 50 basis-point cut would be warranted, Powell might opt for a conservative 25 basis-point reduction due to committee inertia.

In response to the news, the rate-sensitive 2-year Treasury yield experienced a sell-off, while the 10-year yield recovered from earlier losses, steepening the yield curve back to a positive state.

Stock markets on Wall Street showed mixed results, and the US dollar index slightly increased against a basket of currencies.