The U.S. economy added fewer jobs than anticipated in August, offering a fresh indication of an easing in the American labor market that could bolster the case for the Federal Reserve to slash interest rates at its next policy meeting later this month.
Data from the Labor Department’s Bureau of Labor Statistics showed that nonfarm payrolls came in at 22,000 last month, down from an upwardly-revised level of 79,000 in July. Economists had estimated that the figure would stand at 75,000.
An uptick in health care jobs was partially offset by losses in the U.S. government, in the latest sign of a push by the White House to lower the size of the federal workforce. Roles were also shed in mining, quarrying, and oil and gas extraction, the BLS noted.
Meanwhile, the unemployment rate edged higher to 4.3%, up from 4.2% in the prior month and in line with forecasts. Average hourly earnings expansion slowed to 3.7%, also matching projections.
Friday’s hotly-awaited report comes as markets are widely betting that the Fed will choose to ratchet down borrowing costs at its September 16-17 gathering. According to CME’s FedWatch Tool, investors are pricing in about a 100% chance of 25-basis point rate reduction from the Fed’s current target range of 4.25% to 4.5%.
Fed officials are facing pressures to both pillars of their mandate -- keeping price growth stable and promoting maximum employment -- although recent comments from policymakers have indicated that supporting the labor market may be their current priority.
Cutting interest rates can theoretically help to spur spending by businesses who have been reticient to hire during a time of tariff-fueled economic uncertainty, albeit at the risk of pushing up lingering inflation.
"While the weak 22,000 gain in non-farm payrolls in August confirms what already looked a nailed-on rate cut" at this month’s meeting of the rate-setting Federal Open Market Committee, "the limited rise in the unemployment rate to 4.3% will curb calls for a larger 50-basis point move," said Bradley Saunders, North America Economist at Capital Economics, in a note.
Adding to the debate around the report was the fallout from the prior month’s reading, which was both unexpectedly weak and featured deep downward revisions to the June and May totals. The numbers drew the ire of President Donald Trump, who dismissed the commissioner of the BLS, saying -- without evidence -- that the report had been tampered with to hurt him politically. He later nominated a loyalist as a replacement.
The BLS said the change in total nonfarm payroll employment for June was revised down by 27,000, from a gain of 14,000 to a decline of 13,000. Coupled with July’s upward revision of 6,000 jobs, employment in those two months was a combined 21,000 lower than previously reported.
S&P and Nasdaq futures were slightly higher following the report, while the dollar index -- a tracker of the greenback against a basket of six other currencies -- dropped. Rate-sensitive 2-year U.S. Treasury yields and their benchmark 10-year counterparts, which tend to move inversely to prices, both ticked lower.
Source :
https://www.investing.com/news/economic-indicators/us-adds-22000-jobs-in-august-4226798
