U.S. job growth came in slightly weaker than expected in August, but probably not weak enough to prompt the Federal Reserve to start its rate-cutting cycle later this month with a 50 basis point cut.
The U.S. added 142,000 jobs in August, compared to economists' forecasts of 160,000 and July's 89,000 (up from 114,000 previously reported), according to the government's Nonfarm Payrolls report today. The unemployment rate fell slightly to 4.2%, in line with expectations and from 4.3% in July.
After falling significantly in the days leading up to the report's release, Bitcoin's price rose about 1% to $56,500 in the minutes following the report. Prices are still down 5% from last week's levels.
BTC 4-hour price chart | Source: Tradingview
A look at traditional markets showed U.S. stock index futures falling more than initially expected, with the Nasdaq now down just 0.5% after earlier falling more than 1%. The yield on the 10-year U.S. Treasury note fell 5 basis points to 3.68% and the dollar index fell 0.3%. Gold rose 0.5% to $2,557 an ounce, near an all-time high.
Will the Fed cut 25 or 50?
Jobs are always a key data point, and August's numbers are even more interesting as the Federal Reserve prepares to begin cutting interest rates at its mid-September meeting. Conventional wisdom has it that the US central bank will cautiously enter this easing cycle by cutting its benchmark fed funds rate by just 25 basis points. However, the Fed could be swayed by August's weak jobs report to cut rates by 50 basis points at that meeting instead.
The headline numbers from the latest report do not seem to justify the 50 basis point cut. However, the downward revision not only for July (from 114,000 to 89,000) but also for June (from 179,000 to 118,000) is somewhat troubling. Overall, the three-month average of job growth is just 116,000 and will certainly figure in Fed discussions.
A look at the other details in the report paints a somewhat brighter picture. Average hourly earnings rose 0.4% in August, compared with expectations of 0.3% and a 0.1% decline in July. On a year-over-year basis, average hourly earnings rose 3.8%, compared with expectations of 3.7% and a 3.6% gain in July.
“This is a solid, albeit unspectacular, report that largely confirms the ongoing cooling trend,” economist Joe Brusuelas wrote after the release. He said the details supported the Fed’s call for a 25 basis point rate cut.
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