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

As a seasoned crypto investor with over a decade of market experience under my belt, I’ve learned to navigate through economic data releases like a pro. The August job growth numbers came as a bit of a surprise, but they didn’t seem weak enough to trigger an aggressive rate cut from the Federal Reserve.

In August, the U.S. job market expansion fell short of predictions, yet it might not have been feeble enough to push the Federal Reserve to initiate their interest rate reduction plan this month. If they do act, it could be a cut of half a percentage point.

As per the Nonfarm Payrolls report released on Friday morning by the government, the U.S. gained approximately 142,000 jobs in August, which was lower than economists’ predictions of 160,000 jobs. The number of jobs added in July was revised from the previously reported 114,000 to 89,000. The unemployment rate dropped slightly to 4.2%, meeting expectations and down from 4.3% in July.

After examining conventional markets, it appears that U.S. stock index futures have scaled back their significant initial losses. Currently, the Nasdaq is only down by 0.5%, compared to a decrease of over 1% earlier. The yield on the 10-year U.S. Treasury has dropped by 5 basis points, now standing at 3.68%. The dollar index has fallen by 0.3%. Gold prices have risen by 0.5%, approaching its record high of $2,557 per ounce.

Will the Fed cut 25 or 50?

The employment figures for August carry significant weight because the Federal Reserve is scheduled to initiate interest rate reductions during their mid-September gathering. Generally, it was anticipated that the U.S. Federal Reserve would approach this monetary loosening phase with caution, reducing the benchmark fed funds rate by 0.25 percentage points. However, a disappointing August jobs report could persuade the Fed to lower rates by 0.50 percentage points at their meeting in September.

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.

Upon examining additional information from the reports, it appears that the overall image is somewhat more robust. The average hourly wage increased by 0.4% in August compared to predictions of a 0.3% rise, while July saw a 0.1% decrease. Furthermore, on an annual basis, the average hourly wage grew by 3.8%, surpassing expectations of 3.7% and exceeding July’s growth rate of 3.6%.