US employment increased less than expected in August, signaling a steady but orderly labor market slowdown. According to the Labor Department, nonfarm payrolls grew by 1,42,000 jobs last month, falling short of economists’ forecasts of 1,60,000 jobs. July’s figures were also revised down to 89,000 from a previously reported 1,14,000.
Despite the smaller payroll increase, the unemployment rate fell to 4.2%, suggesting the labor market remains stable. This slowdown may not warrant a significant interest rate cut by the Federal Reserve in its upcoming meeting.
Analysts note that August payroll figures often come in weaker than expected before being revised upward. The education sector is expected to contribute to higher hiring numbers in future revisions as seasonal adjustments are accounted for.
The start of the new school year, however, varies across the country, which can throw off the so-called seasonal factors. The initial August payrolls counts have been revised higher in 10 of the last 13 years. Layoffs remain at historic low levels.
The drop in the unemployment rate followed four straight monthly increases, which had lifted it near a three-year high of 4.3% in July. Early on Friday, financial markets saw a roughly 43% probability of a half-point rate cut at the Fed’s Sept. 17-18 policy meeting, according to CME Group’s FedWatch Tool. The odds of a 25 basis point rate reduction were around 57%.
Average hourly earnings increased 0.4% in August after falling 0.1% in July. Wages increased 3.8% year-on-year after advancing 3.6% in July. Still-solid wage growth continues to underpin the economy through consumer spending.
(With inputs from Reuters)