The August nonfarm payrolls report was a slight disappointment, providing fresh confirmation of a continued cooling in US labour market conditions. The 142k net jobs added last month was slightly below consensus, while there was also a relatively sizable downward revision to the July number, dragging the 3-month moving average of job creation to its lowest level since the early days of the COVID-19 pandemic.
We are, however, continuing to see a dichotomy between the household and establishment survey. There was no upside surprise in the jobless rate, as this dropped as expected to 4.2%. Wage growth is also accelerating again, which may provide a fresh challenge for the Federal Reserve in its quest to achieve its price mandate.
While markets have ramped up their bets in favour of a jumbo rate reduction from the Fed this month, the data in itself hasn’t been sufficient to seal the deal for a 50 basis point cut, which remains less than 60% priced in by futures markets. Next week’s CPI report for August will now be key, as a miss here may be required for the FOMC to go big in September.
The information contained in this document was obtained from sources believed to be reliable, but its accuracy or completeness cannot be guaranteed. Any opinions expressed herein are in good faith, but are subject to change without notice. No liability accepted whatsoever for any direct or consequential loss arising from the use of this document.
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