Ahead of a key Federal Reserve meeting later this month to set interest rates, total nonfarm payroll employment increased by 142,000 in August, and the unemployment rate changed little at 4.2%, the U.S. Bureau of Labor Statistics reported Aug. 6. The gains were weaker than forecasted predictions of 161,000 jobs, but were better than July’s showing of 114,000. The numbers from the last two months indicate that the labor market is cooling faster than anticipated.
This latest Jobs report may prompt the Federal Reserve to lower its key interest rate more sharply at a meeting later this month.
The release presents statistics from two monthly surveys. The household survey measures labor force status, including unemployment, by demographic characteristics. The establishment survey measures nonfarm employment, hours, and earnings by industry.
“In his Jackson Hole address in late August, Fed Chair Jerome Powell highlighted the sufficient cooling in the jobs market to date, noting that, ‘We do not seek or welcome further cooling in labor market conditions,’” said Realtor.com Chief Economist Danielle Hale. “Job growth has slowed and unemployment ticked up, and in different words, the Fed has acknowledged that enough is enough. The Fed will make a cut to its rate in September, and the only remaining question that will be informed by data between now and September 18 is, how big will it be? I expect that today’s goldilocks labor market reading gives the Fed room to begin gradually, with a 25 basis point cut.
“Housing activity has been lackluster. High prices and mortgage rates have cut into affordability, and even though mortgage rates have subsided notably from recent highs, housing market data suggest that both buyers and sellers are hesitant to engage. In fact, the number of homes actively for sale in August hit a 4.5-year high, according to Realtor.com data. It appears that both buyers and sellers may be waiting for additional mortgage rate declines, with newly listed homes down, sapping a 9-month streak of annual gains. Despite the dip in new sellers, buyer activity waned even more, and the growing number of listings give shoppers more bargaining power.”
MBA SVP and Chief Economist Mike Fratantoni had these comments:
“There were job losses in the manufacturing sector in August but relatively modest job gains in the services sector,” he said. “This is consistent with a cooling of demand for workers from companies across the board. Average hourly earnings picked up last month to a 3.8% annual change from 3.6% in July.
“Federal Reserve officials have recently pivoted from a primary focus on inflation to a more balanced view, with concerns both about inflation and employment. This report highlights that such a pivot makes sense, and that a 25-basis-point cut at its September meeting is a sensible first step at this time.”
CoreLogic Chief Economist Selma Hepp remarked that, “The labor market continues to show signs of softening overall, but remains unlikely to fall apart completely. The nation’s economy remains resilient, with pockets of growth continuing in some areas while weakness remains in areas sensitive to high rates, such as homes and autos. The real question remains whether or not the Federal Reserve waited too long to begin to reduce rates in the effort to avoid recession and if a soft landing is indeed achievable.”
