Critical non-farm payroll data has been released. While payroll growth of 114K in July was expected to rebound to 165K in August, the figure revealed an increase of 142 K. The increase in payroll figures was in line with the growth seen in recent months but significantly below the previous 12-month average of 202K.
On the other hand, the unemployment rate, which had risen to 4.3% in the previous month—the highest since November 2021—fell to 4.2%, in line with market expectations. The U.S. Bureau of Labor Statistics report also showed that the number of temporary layoffs in August decreased by 190K, while the number of permanent job losses remained unchanged.
A notable aspect of the report is the downward revision of June's payroll growth by 61K, from 179K to 118K, and the downward revision of July's 114K increase by 25K, bringing it down to 89K.
Consequently, the figures indicate that the U.S. labor market had started to cool earlier than anticipated. Expectations for an aggressive 50 basis point rate cut in September have risen to 53%, and the USD weakened.
However, when considered alongside the drop in the unemployment rate, Fed officials are likely to interpret this report as a sign of labor market normalization. Therefore, it is difficult to say that this report will convince the Fed to implement a 50 basis point rate cut. Officials' speeches will be closely monitored to understand how the Fed views this report.