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U.S. Job Growth Misses Expectations in August; Jobless Rate Falls to 4.2%
August job growth fell short of forecasts, with nonfarm payrolls up by 142,000 and the unemployment rate dropping to 4.2%. The Fed's expected rate cut may be moderated.
ND
by News Desk
2024-09-06
U.S. Job Growth Misses Expectations in August; Jobless Rate Falls to 4.2%

U.S. employment growth in August came in below expectations, with nonfarm payrolls rising by just 142,000, the Labor Department reported on Friday. This was below the anticipated increase of 160,000 jobs and came after a downward revision of July’s figures to 89,000. Despite the slower job growth, the jobless rate dropped to 4.2%, signaling a managed slowdown in the labor market.

 

The softer job numbers may reflect seasonal adjustments that often lead to an initially lower August print before subsequent revisions. Historically, August payroll figures tend to be revised upward, as the seasonal hiring in the education sector can be misestimated due to varying school start dates across the country.

 

Jeffrey Roach, chief economist at LPL Financial, commented, "The labor market is cooling at a measured pace. Businesses are still adding to payrolls but not as indiscriminately. The Fed will likely cut by 25 basis points and reserve the right to be more aggressive in the last two meetings of the year."

 

Sector-wise, the construction industry led job growth with an addition of 34,000 jobs, while healthcare saw an increase of 31,000 jobs. However, the overall momentum has slowed, with job gains about half the average monthly increase of 60,000 observed over the past year. Social assistance saw a modest rise of 13,000 jobs, while manufacturing employment decreased by 24,000.

 

The August figures reflect the need for approximately 145,000 to 200,000 new jobs each month to keep pace with the growth in the working-age population, driven partly by a surge in immigration. Household employment rose by 168,000, absorbing the 120,000 new entrants into the labor force and contributing to the decline in the unemployment rate from 4.3% in July.

 

Financial markets reacted initially with increased odds of a half-point rate cut by the Federal Reserve, though these expectations were later adjusted to around 43%, with a 57% probability of a 25 basis point reduction. U.S. Treasury yields fell initially following the data, while the dollar experienced fluctuations against a basket of currencies.

 

Wage growth remains robust, with average hourly earnings up 0.4% in August, bringing the year-on-year increase to 3.8%. This continued wage growth supports consumer spending and underpins the overall economy despite the cooling labor market.
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