Washington (AFP) – US hiring bounced back in August but missed expectations while the jobless rate crept down, government data showed Friday, paving the way towards central bank rate cuts in the coming weeks. The world’s biggest economy added an estimated 142,000 jobs last month, an increase from July’s figure which was revised notably lower to 89,000, said the Department of Labor. June jobs gains were also revised significantly down. The August number came in below economists’ expectations of 165,000, according to a Briefing.com consensus forecast. The unemployment rate meanwhile declined slightly from 4.3 percent to 4.2 percent, a shift that should assuage some policymakers’ fears.
Overall, the figures reaffirm perceptions of a cooling labor market, adding to analysts’ anticipation that the Federal Reserve will begin to lower rates from decades-high levels this month. With a solid payrolls increase, lower jobless rate and rise in earnings, analysts see a higher chance that the Fed opts for a smaller cut of 25 basis points rather than 50. “With inflation back down close to normal levels, it is important to focus on sustaining the historic gains we have made for American workers,” President Joe Biden said in a statement. Brendan Boyle, top Democrat on the House Budget Committee, added that the US economy has “made significant progress on inflation, and now the Fed must secure this progress by lowering interest rates” at this month’s policy meeting.
Analysts have been eying the jobs market as high interest rates bite while inflation cools, with some arguing the Fed has waited too long to lower the benchmark lending rate. On Friday, Republican presidential candidate Donald Trump called the jobs numbers “terrible” while the Republican National Committee took aim at the downward revisions on job growth. How well the market holds up could affect the size of Fed rate cuts following its September 17-18 gathering. “The large downward revision to payroll gains in the prior two months and the continued narrow concentration in payroll advances underscore that the labor market is losing steam rather quickly,” said Nationwide chief economist Kathy Bostjancic.
While she does not expect a large reduction this month, current trends leave open the possibility of larger 50 basis-point rate cuts in November and December, she said. Fed governor Christopher Waller said in a speech that the time has come to lower rates, adding that he is “open-minded” about the size and pace of cuts — with decisions being dependent on incoming data. Average hourly earnings rose more than expected in August, by 0.4 percent to $35.21, said the Labor Department. From a year ago, wage growth was 3.8 percent up –- an acceleration from before also.
“A lot of the macroeconomic indicators lately have been sending mixed messages about the overall economy, but consistently weak messages about the labor market,” ZipRecruiter chief economist Julia Pollak told AFP. “The labor market has slowed and slackened over the past three months, with job growth in the private sector outside of healthcare and social assistance falling to an unusually slow pace,” she added. Economist Nancy Vanden Houten of Oxford Economics also noted the “sharp decline in manufacturing jobs” was a surprise relative to her forecast.
But although the unemployment rate has been a point of concern, she flagged that “it has not been accompanied by a sharp rise in workers who have permanently lost their jobs.”
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