The U.S. economy added 142,000 jobs in August—fewer than expected, but enough to bring the unemployment rate down to 4.2%.
Economists had forecast 165,000 new jobs, making the report slightly underwhelming.
Still, the dip in unemployment and a boost in wages suggest the labor market is cooling, but not collapsing.
Revised figures for June and July show 86,000 fewer jobs added than previously reported, casting a shadow over recent months.
July’s numbers, which initially showed 89,000 new jobs, were slightly revised upward.
Despite the slowdown, wage growth continues to accelerate, rising 3.8% year-over-year, up from July’s 3.6%.
Every month, wages increased by 0.4%, double the 0.2% growth seen the month prior.
Paul Ashworth, Capital Economics’ chief North America economist, reassured clients that the report remains consistent with an economy experiencing a “soft landing” rather than plummeting into a recession.
Federal Reserve Chair Jerome Powell, in an August speech, highlighted the “unmistakable” cooling in the labor market but noted that the Fed does not “seek or welcome further cooling” in employment conditions.
The latest data has sparked debate over how aggressively the Fed should cut interest rates at its September meeting.
Economists are split—some expect a modest 25 basis point cut, while others argue a steeper 50-point cut may still be on the table later in the year.
Signs of a labor market slowdown are mounting.
ADP’s August report showed private payrolls added just 99,000 jobs, well below expectations. This marks the fifth consecutive month of declining growth.
Additionally, job openings hit their lowest level since January 2021, according to data released on Wednesday.
Nationwide chief economist Kathy Bostjancic noted that while the August job numbers showed “solid gains,” the downward revisions to earlier months and the concentration of current job growth in fewer sectors indicate that the labor market is losing momentum.
This could potentially prompt the Fed to consider a larger rate cut later this year.
The business community and traders seem to agree, with markets pricing in over 100 basis points of cuts by year’s end.
While the labor market isn’t booming, it continues to walk a fine line between strength and stagnation—leaving economists and the Fed closely watching each new development.
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