U.S. job growth rebounded in August after summer employment gains were lower than initially reported.

The U.S. economy added 142,000 jobs, according to the Labor Department, up from July's reading that sparked fears of a slowdown and rattled global financial markets; the unemployment rate fell to 4.2% in August.

The Labor Department lowered its estimates for job growth in June and July, by a combined 86,000 jobs, further pointing to weak summer hiring.

The latest nonfarm report may not clearly resolve the question of whether the Federal Reserve will cut interest rates by 25 basis points in September or cut by 50 basis points to prevent unwanted weakness in the job market.

Michelle Girard, head of NatWest's U.S. division, said the jobs report "will not sway anyone from their previous positioning." She noted that the report supports those who believe the Fed will cut interest rates by 25 basis points because it shows the continued resilience of the labor market, while a 50 basis point cut is also warranted due to the downward revision of the previous value.

Girard stressed the Fed's intense focus on inflation, with the main concern being whether they can reach their 2% inflation target. However, she noted that there is "ample evidence" that inflation is trending downward, so the Fed's focus is now turning to the economy. Girard said:

“In terms of the economy, it’s clear that the economy is slowing down. So I think the real discussion for the Fed is where do you think rates should end up? Or where do you think you have to be? Because I think that plays a big role in the size of what you’re going to do.”

After the report was released on Friday, gold gave up some of its intraday gains, silver fell more than 1% on the day, and U.S. stocks continued to fall, with the Nasdaq falling more than 2% and the S&P 500 falling more than 1%.

In a speech shortly after the jobs data was released, New York Fed President John Williams echoed recent comments from other Fed officials that a rate cut is coming.

“Now is an appropriate time to make the stance of policy less restrictive by lowering the target range for the federal funds rate,” Williams said. With inflation near the Fed’s 2% target, “the economy is in balance and the stance of monetary policy can be gradually shifted to a more neutral stance over time,” he said.

Fed Governor Waller also said that maintaining the economy's forward momentum means the time has come to start lowering the policy rate at the upcoming meeting.

But most notably, Waller noted that he would support a “premature” rate cut if appropriate and a deeper rate cut if necessary, which could indicate he is willing to start the Fed’s rate-cutting cycle with a straight 50 basis point cut.

The nonfarm payrolls report is one of the most anticipated economic indicators in years, and the August report comes at a time when the Federal Reserve is preparing to cut interest rates.

Investors and the Federal Reserve have focused on inflation since 2022 for healthy signs that the U.S. economy is overheating. But as price pressures have fallen in recent months, economists have turned their attention to worrying signs in a labor market that has been rewarding Americans with higher pay and greater productivity.

A month ago, a weaker-than-expected July nonfarm payrolls report revived fears of an economic slowdown, with jobless claims rising, job openings falling and wage growth slowing. A string of weak economic data shocked Wall Street in early August and led to a global sell-off, briefly pushing record-setting U.S. stocks into one of their most volatile periods in years.

A big question in recent weeks is whether the summer market turmoil is temporary, caused by hurricanes that have curbed hiring, or is evidence of a broader economic slowdown.

The answer is expected to be a major factor in determining the winner of the U.S. presidential election, with Vice President Harris making a broad pitch to extend Biden's agenda and Republican candidate Trump promising to restore the U.S. economy to pre-pandemic levels.

Article forwarded from: Jinshi Data