U.S. Added 142K Jobs in August, Likely Setting Stage for 25 Basis Point Rate Cut

• The U.S. posted August job growth of 142,000, slightly less than expected, but the unemployment rate dipped to 4.2%
• Sizable downward revisions to the July and June reports made the employment picture somewhat weaker than previously thought
• Under sizable pressure all week, bitcoin bounced following the report

U.S. job growth was slightly less than expectations in August, but probably not weak enough to prompt the Federal Reserve to begin its rate-cutting cycle later this month with a 50 basis point move.

According to Friday morning's Nonfarm Payrolls report from the government, the U.S. added 142,000 jobs in August versus economist forecasts for 160,000 and July's 89,000 (revised from a previously reported 114,000). The unemployment rate edged down to 4.2%, in line with expectations and from 4.3% in July.

Down sizably in the days leading up to the report, the price of bitcoin {{BTC}} rose about 1% to $56,500 in the minutes following the report. The price remains lower by 5% from week-ago levels.

A check of traditional markets shows U.S. stock index futures trimming early large losses, with the Nasdaq now lower by just 0.5% against a decline of more than 1% earlier. The 10-year U.S. Treasury yield is lower by 5 basis points to 3.68% and the dollar index has dipped 0.3%. Gold is up 0.5% to $2,557 per ounce, close to its all-time high.

Will the Fed cut 25 or 50?

Always a key data point, the jobs numbers for August had taken on extra importance given that the Federal Reserve is set to begin cutting rates at its mid-September meeting. The conventional thinking believed the U.S. central bank would enter this monetary easing cycle cautiously by lowering its benchmark fed funds rate just 25 basis points. The Fed, though, might be swayed by a weak August employment report to instead slash rates 50 basis points at that meeting.

The headline numbers from this report don't appear to make the case for a 50 basis point move. The downward revisions to not just July (to 89K from 114K), but also June (to 118K from 179K) are somewhat troublesome though. Taken together, the three month average job growth of just 116,000 is sure to come up in the Fed's discussions.

A check of other report details shows a somewhat stronger picture. Average hourly earnings rose 0.4% in August versus expectations for 0.3% and July's 0.1% dip. On a year-over-year basis, average hourly earnings were higher by 3.8% versus expectations for 3.7% and July's 3.6%.

"It?s a solid, if unspectacular, report that largely confirms the cooling trend in place," wrote economist Joe Brusuelas minutes following the release. The details, he said, support a 25 basis point rate cut from the Fed.

My thoughts on the US August jobs report. Once one looks at the detail it supports a 25 basis point cut from the Fed. It?s a solid, if unspectacular, report that largely confirms the cooling trend in place. https://t.co/mtIlDEW5hL

-- Joseph Brusuelas (@joebrusuelas) September 6, 2024