Source: AFP
U.S. hiring rebounded in August but missed expectations while the jobless rate fell, government data showed on Friday, paving the way for central bank rate cuts in coming weeks.
The world’s largest economy added about 142,000 jobs last month, an increase from July’s figure that was revised significantly lower to 89,000, the Labor Department said.
June’s job gains were also revised down significantly.
The August number was below economists’ expectations of 165,000, according to a Briefing.com consensus forecast.
The unemployment rate meanwhile fell slightly from 4.3 percent to 4.2 percent, a shift that should allay the fears of some policymakers.
Overall, the data confirmed perceptions of a tepid labor market, bolstering analysts’ expectations that the Federal Reserve will begin cutting interest rates from decade-high levels this month.
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With steady wage growth, a lower unemployment rate and rising wages, analysts see a greater chance the Fed will opt for a smaller cut of 25 basis points instead of 50.
“With inflation retreating to near normal levels, it is important that we focus on maintaining the historic gains we have made for American workers,” President Joe Biden said in a statement.
Brendan Boyle, the top Democrat on the House Budget Committee, added that the US economy “has made significant progress on inflation, and now the Fed needs to secure that progress by cutting interest rates” at this month’s policy meeting.
“Losing Steam”
Analysts have looked to the labor market as high interest rates bite while inflation cools, with some arguing the Fed waited too long to cut its benchmark lending rate.
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On Friday, Republican presidential nominee Donald Trump called the jobs numbers “terrible,” while the Republican National Committee took aim at downward revisions to job growth.
How well the market holds up could influence the size of Fed rate cuts after the September 17-18 meeting.
“The large downward revision in payroll gains over the past two months and the continued tight focus on payroll advances underscore that the labor market is losing momentum rather quickly,” said Nationwide Chief Economist Kathy Bostancic.
While he doesn’t expect much of a cut this month, current trends leave open the possibility of larger rate cuts of 50 basis points in November and December, he said.
Fed Governor Christopher Waller said in a speech that the time has come for lower interest rates, adding that he was “open-minded” about the size and pace of cuts — with decisions dependent on incoming data.
Average hourly earnings rose more than expected in August, up 0.4 percent to $35.21, according to the Labor Department.
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From a year ago, wage growth was 3.8 percent — an acceleration from before.
“Many of the macroeconomic indicators lately have been sending mixed signals about the overall economy, but consistently weak signals about the labor market,” ZipRecruiter chief economist Julia Pollack told AFP.
“The labor market has slowed and slowed over the past three months, with private sector job growth outside of health care and social assistance falling at an unusually slow pace,” he added.
Economist Nancy Vanden Houten of Oxford Economics also noted that the “sharp decline in manufacturing jobs” was a surprise relative to her forecast.
However, while the unemployment rate is a point of concern, he pointed out that it “has not been accompanied by a sharp increase in workers who have lost their jobs permanently”.
Source: AFP
