The U.S. economy added fewer-than-expected new jobs last month, with big downward revisions to recent summer tallies, suggesting a cooling labor market that is likely to cement the case for a larger Federal Reserve rate.
The Bureau of Labor Statistics reported that a net 142,000 new jobs were created in August, a tally well above the downward revised July total of 89,000 but still well south of this year’s monthly average of around 200,000.
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Revisions to both the July and June totals removed around 86,000 jobs from the original estimates published by the BLS.
Average hourly earnings rose 0.4% from July levels and were up 3.8% on an annual basis, with both tallies coming in surprisingly ahead of Wall Street forecasts.
The headline unemployment rate edged higher to 4.2%, while the labor force participation rate was unchanged at 62.7%.
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Economists were looking for a headline total of around 164,000 new hires in the August report with a headline unemployment rate of 4.2%.
“We do not seek or welcome further cooling in labor market conditions,” Federal Reserve Chairman Jerome Powell said during his address to the Jackson Hole symposium last month.
“Overall, the economy continues to grow at a solid pace. But the inflation and labor market data show an evolving situation,” he added. “The upside risks to inflation have diminished. And the downside risks to employment have increased. As we highlighted in our last statement, we are attentive to the risks to both sides of our dual mandate.”
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U.S. stocks pared declines following the data release, with futures tied to the S&P 500 indicating an opening-bell decline of around 17 points while those linked to the Dow Jones Industrial Average suggests a 125-point pullback. The Nasdaq, meanwhile, was indicated 125 points lower.
Benchmark 10-year Treasury note yields fell 3 basis points to 3.689% following the data release, the lowest since December of last year. Rate-sensitive 2-year notes fell 5 basis points to 3.661%.
CME Group’s FedWatch, meanwhile, pegs the odds of a 50-basis-point (0.5 percentage point) reduction in September at around 51%, up from 41% prior to the data release, with two more quarter-point cuts priced in over the final two meetings of the year.
Data on Thursday showed weekly jobless claims slipped by around 5,000 over the week ended Aug. 21, the Labor Department said, with around 227,000 Americans filing their first paperwork for unemployment benefits.
The running total of continued claims, meanwhile, which lag the headline measure by a week, fell to 1.838 million from the highest level since 2021 during last month’s measuring period.
Payroll processing group ADP’s National Employment report, meanwhile, showed private sector job creation slowed to 99,000 last month, with wage growth holding at rates last seen in mid-2021.
