- In a mixed August labor report, the unemployment rate ticked lower to 4.2% as expected (as the increase in temporarily laid-off workers in July reversed in August) in keeping with MacroX’s unemployment fears nowcast. However, the rising trend in the unemployment rate remains clear and continues to signify a weakening labor market
- The US economy added 142k jobs in August, slightly lower than the 160k consensus, but payroll growth in the previous two months was revised lower by a combined 86k. Over June, July, and August, payroll growth grew at an average of 116k/month -? a clear deceleration in the pace of job growth
- On a more positive note, measures of labor participation remain at or close to cycle highs. The prime-age employment to population ratio remained at 80.9% in August - a post-pandemic high. Furthermore, wage growth was slightly stronger than expected at +3.8% YoY (versus 3.7% consensus).
- This labor report continues to show a softening labor market and makes clear why the Fed needs to begin moving policy toward neutral. We think this report makes a 25bps cut more likely than 50bps later this month but we will be looking closely at Fed rhetoric before the blackout period starts tomorrow for further guides into FOMC thinking
