The U.S. economy added 142,000 jobs in August – weaker growth than in previous months – while the unemployment rate remained flat at 4.2%, according to the U.S. Bureau of Labor Statistics.
The slowing labor market increases the likelihood of Fed rate cut later this month.
Market segments that saw the strongest job growth in August included health care and construction.
The number of unemployed people was relatively flat compared with the previous month, at 7.1 million.
A year ago, the jobless rate was 3.8% and the number of unemployed people was 6.3 million.
The labor force participation rate, at 62.7%, was little changed in August and was little changed over the year.
The employment-population ratio was little changed at 60% in August but was down by 0.4 percentage points over the year.
Average hourly earnings for all employees on private non-farm payrolls increased by 14 cents, or 0.4%, to $35.21.
Over the past 12 months, average hourly earnings have increased by 3.8%. In August, average hourly earnings of private-sector production and nonsupervisory employees increased by 11 cents, or 0.4%, to $30.27.
Sam Williamson, senior economist for First American, says the August report “signals that the U.S. labor market continues to cool gradually, which supports the Federal Reserve’s impending pivot from an inflation-fighting campaign to buoying a cooling labor market.”
“10-year Treasury yields are essentially flat, implying market sentiment is unchanged and the Fed cuts are priced into mortgage rates,” Williamson says in a statement. “The very rate-sensitive housing sector remains sluggish due to the affordability constraints caused by record-high house prices and still-elevated mortgage rates.”
The ongoing softening of the labor market, “likely sets up the Fed to kick off its rate-cutting cycle with a 25-basis point cut later this month,” Williamson says. “Had the labor market deteriorated more significantly, it may have triggered the Fed to consider a 50-basis point cut in September.”
“The timing and pace of future Fed rate cuts will largely depend on what incoming economic data suggests about cooling inflation and softening labor market conditions in the coming months,” he adds. “Assuming no surprise jump in inflation next week and continued labor market softening in the months ahead could certainly bolster the argument for additional rate cuts in November and December. The benefit of these rate cut expectations are already appearing on the 30-year fixed rate mortgage.”
Photo: Saulo Mohana