The US official employment report showed that the US economy added 315,000 jobs in August, slightly higher than the expected 300,000; the unemployment rate unexpectedly rose to 3.7% from 3.5%. According to Wells Fargo analysts, today’s data in isolation suggests that the Fed raised rates by 50 basis points at its September meeting, but it doesn’t solve the problem alone. Analysts explained that while the August jobs report gave hope that the Fed could achieve an elusive soft landing, there is still a lot of work to be done to calm inflationary pressures from the labor market.
Key quote:
“The labor market cooled in all the right ways in August, at least as far as the Fed is concerned. Nonfarm payrolls increased by 315,000 last month, in line with consensus expectations, and the industry is generally up again. This pace marks a decline from the downwardly revised 402K average of the previous three months, but it still remains It was a strong increase.”
“While the more modest growth in employment suggests that a more balanced labor market is emerging in part due to weaker demand for workers, this Also credited to improving supply.”
“A slowdown in hiring in August helped bridge the gap that has emerged between nonfarm payroll growth and labor market measures in recent months.”
“Today’s report in isolation favors a 50bps rate hike at the September FOMC meeting, but it won’t fix the problem on its own. As the Fed focuses on inflation, August CPI of 50 vs 75 bps will be the last major piece of the puzzle. But we didn’t see anything in the August jobs report that would change the general path ahead: rate hikes are likely to extend beyond September and in the long Remaining restrictive for some time. We expect clearer signs of labor market weakness going forward, as the FOMC increasingly acknowledges that a cooling labor market is necessary to keep inflation in check in the long run.”
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