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Taken on its own, August was a solid month for the labor market. The U.S. economy added 142,000 jobs and unemployment ticked down from 4.3% in July to 4.2%. Workers are seeing solid wage gains, with average hourly earnings up 0.4% in August. But taking a broader view of the past several months shows an undeniable pattern of cooling labor market conditions. August’s gain was below consensus and only made possible by revisions to June and July that left July employment 86,000 jobs lower than previously reported. Smoothing through the monthly changes using three-month moving averages, job growth averaged just over 116,000 during the three months ending in August. Excluding the severe employment declines during the pandemic, this is the weakest three-month job gain since July of 2019. The trend is also clear, rolling three-month average job gains have decreased for five consecutive months and the rolling three-month average unemployment rate has risen in each of the past seven months. The direction of the labor market is undeniable, and the commencement of rate cuts that the Fed has clearly signaled should occur at the next FOMC meeting in a couple of weeks. Interestingly, at the time of this writing, the probability of a 50-basis point rate cut eased to 27% per CME Group, lower than it had been yesterday, last week, or last month. Wage gains and a sequential decline in unemployment are likely being viewed positively. The much higher probability of a 25-basis point cut still feels appropriate to me. Fed officials will want to appear in control and politically neutral and a larger cut jeopardizes those things. Barring any economic surprises or outside shocks, orderly rate cuts should keep the markets calm, and the Fed has a good chance of landing the plane successfully. But there will be some bumps as monetary policy is normalized, and certainly reasonable risks that the Fed will need to act more boldly to keep the soft landing in sight. What are your thoughts? Have the latest numbers changed your perspective?

The market liked the cooling job market report this morning (Dow up 500+, S&P up 68, Nasdaq up 340+). This has been, perhaps, the second biggest worry (after inflation) that might be stopping the Fed from cutting rates. Does this put rate cuts back on the table earlier? We've now seen lower than expected GDP, consumer sentiment slippage, and slowing job growth. Will this uncertainty translate into slower inflation? Or will we get stuck with higher inflation and a slowing economy? "The US economy added 175,000 new jobs and the unemployment rate rose to 3.9% last month, new data from the Bureau of Labor Statistics showed Friday. Wall Street economists had expected nonfarm payrolls to rise by 240,000 and the unemployment rate to remain at 3.8%, according to Bloomberg data." "Wages also rose less than forecast, with average hourly earnings rising 0.2% over last month and 3.9% over the last year. Economists had expected to see a monthly jump of 0.3% in April and a 4% rise over last year." "Friday's report also showed February's job growth revised down — to a gain of 236,000 nonfarm payroll jobs from the 270,000 previously reported — while March's report was revised up to job gains of 315,000 from the 303,000 initially reported." "The slowdown in wage growth seen last month also helps the case for the Federal Reserve to lower interest rates at some point this year. Even as inflation data have remain higher than the central bank's 2% target and shown "bumpy" progress toward that level in recent months." "In a press conference on Wednesday, Fed Chair Jerome Powell downplayed the idea that wage pressures today are creating a meaningful inflationary impulse, noting 'essentially all wage measures have come down substantially' from peaks reached after the pandemic." #jobs #rates #economy #unemployment #inflation https://lnkd.in/gu5WHMMc

U.S. job growth in August came in lower than expected, signaling a slowdown in the labor market, yet the unemployment rate dropped to 4.2%, reinforcing the notion that the economy is not collapsing. Despite the weaker-than-forecast increase of 142,000 jobs, solid wage growth and steady consumer spending suggest the economy is still on solid ground. This tempered labor market cooling supports expectations that the Federal Reserve will opt for a 25-basis-point interest rate cut at its upcoming meeting rather than the more aggressive half-point cut that some had speculated. The Labor Department’s report on Friday highlighted job gains in sectors like construction and healthcare, though manufacturing and retail saw declines. Revised data also showed 86,000 fewer jobs were added in June and July than previously thought, further pointing to a slowdown in hiring. However, wage growth remained robust, rising 0.4% month-on-month, which could keep consumer spending afloat and help stave off a recession for now. Fed officials have signaled readiness for rate cuts in the face of slowing labor market momentum, though the likelihood of a larger cut appears to be fading. With unemployment slightly down and wages holding strong, the Federal Reserve is likely to opt for a measured approach. #USJobsReport #LaborMarket #FederalReserve #InterestRates #WageGrowth #JobGrowth #EconomicOutlook #RecessionFears #Inflation #ConsumerSpending #SoftLanding https://lnkd.in/daskTVpU

In May, the U.S. labor market delivered a robust performance, surpassing expectations with a surge in job creation and a notable uptick in annual wage growth, indicating the continued resilience of the economy. However, the simultaneous increase in the unemployment rate to 4.0% from April's 3.9% added a layer of complexity to the interpretation of these numbers, raising questions about the Federal Reserve's future policy decisions. The latest employment report from the Labor Department unveiled a stronger-than-anticipated addition of 272,000 jobs last month, far exceeding economists' forecasts. This surge in employment, coupled with upward revisions in March and April figures, underscored the underlying strength of the labor market, which has been a key pillar supporting economic growth. While the rise in the unemployment rate may seem contradictory, it reflects a more nuanced picture of the labor market dynamics. Despite the increase, the rate remains at a level forecasted by the Fed earlier this year, suggesting that while job creation remains robust, it may not be sufficient to absorb all available labor force participants. The unexpected acceleration in wage growth further complicated the Fed's policy outlook, as it signaled potential inflationary pressures. The prospect of wage gains outpacing inflation raised concerns about the Fed's ability to contain price increases without stalling economic growth. Financial markets reacted swiftly to the data, slashing the odds of a September rate cut and recalibrating expectations for future monetary policy actions. While the Fed is expected to maintain its current interest rate range at the upcoming meeting, the divergent signals from the labor market underscore the challenges facing policymakers as they navigate the path forward. #USEconomy #JobsReport #Unemployment #WageGrowth #FederalReserve #MonetaryPolicy #Inflation #LaborMarket https://lnkd.in/dXgpWTce

The US labor market decelerated last month, but June job gains still sported an impressive 206,000 figure, slightly above projections calling for 195,000 and below May’s downwardly revised 218,000. Workers continued to enjoy wage bumps, with average hourly earnings rising 0.3% m/m and 3.9% y/y, in-line with the median estimate. But while headcount additions and rising paychecks remained robust, there was certainly some weakness under the hood. Last month’s roster expansion featured yet another non-cyclical tilt, while three economically sensitive sectors lost employees. Indeed, the professional/business services, retail trade and manufacturing segments saw payrolls decline 17,000, 8,500, and 8,000. Additionally, over half of the progress was derived from the private education/health services and government groups, which added a combined 152,000. Temporary help was down a massive 48,900 in June, the most since April 2021, indicating reduced labor demand. Perhaps most concerning, however, is the steady rise in unemployment, which rose for the third consecutive month to 4.1%, the loftiest level since November 2021. The increase in joblessness is not a favorable development for folks that clock-in, but if the trend continues, will certainly provide the nation with interest rate relief. Market players are responding by raising the odds of the Fed dishing out a September cut to 72%. After all, what the central bank wants is a gradual and controlled cooling of the employment market, hoping that the development will serve to quell inflationary pressures. I invite you to listen to a more in-depth discussion about the economy by viewing my interview this past Wednesday with Josh Lipton and Seana Smith of Yahoo Finance: https://lnkd.in/g7hbQZVn . I touched upon employment conditions, consumer spending trends, inflation, yield equilibrium and the journey across the monetary policy bridge: Hope you all had a happy 4th! #economy #jobs #federalreserve #markets #rates

📈 Hiring Surge Defies Expectations U.S. private payrolls surged by 233,000 in October, more than double the expected 111,000, marking the highest monthly gain since July 2023. Although it’s a single data point, and we should not assume a trend yet, this report shows excellent resilience in the labor market. - Wage Growth Cools: Job switchers saw a 6.2% wage increase, while those who stayed averaged a 4.6% rise, signaling wage growth is cooling to 2021 levels. - Implications for the Fed: The Federal Reserve monitors job growth closely as it evaluates interest rate policy. Today's numbers raise questions about a potential pause on rate cuts. The Fed may now weigh strong hiring against its long-term goals of achieving sustainable growth without overheating the economy. - Market Reaction: Treasury yields and the dollar rose following the ADP report, indicating market expectations for a more cautious Fed stance on future rate adjustments. Strong labor demand and cooling wages suggest a complex economic picture, so investors should watch Friday’s comprehensive US jobs report. If robust hiring persists, it could indicate a resilient economy, but it also means that the Fed may maintain higher rates longer to manage inflation risks. #economy #fed #jobs

“U.S. employment increased solidly in June, but government and healthcare services hiring made up about three-quarters of the payrolls gain and the unemployment rate hit a 2-1/2-year high of 4.1%, pointing to a slackening labor market that keeps the Federal Reserve on course to start cutting interest rates soon.” “The Labor Department's closely watched employment report on Friday also showed the economy created 111,000 fewer jobs in April and May than previously estimated, suggesting the trend in payrolls growth was slowing.” “Annual wages increased at the slowest pace in three years amid an expanding labor pool, adding to the flashing warning signals in the jobs market. About 277,000 people joined the labor force, accounting for the increase in the jobless rate from 4.0% in May to the highest level since November 2021.” “"So far, we don't see apocalyptic signs within the labor market, but investors should be wary when the labor market is supported by government payrolls," said Jeffrey Roach, chief economist at LPL Financial. "The downward revisions to the previous two months is consistent with an economic slowdown."” “When added to the moderation in prices in May, the report could boost Fed policymakers' confidence in the inflation outlook after the disinflationary trend was disrupted in the first quarter. Financial markets expect the U.S. central bank, which aggressively tightened monetary policy in 2022 and 2023, to start its easing cycle in September.” “The 525 basis points worth of rate hikes from the Fed since 2022 as well as the exhaustion of excess savings accumulated during the COVID-19 pandemic are eroding demand.” “Traders of federal funds futures saw a roughly 77% probability of a rate cut at the Fed's Sept. 17-18 meeting, according to CME Group's FedWatch tool. Traders are also pricing in a rising chance of a second rate cut in December.” - Lucia Mutikani

April revealed a cooling U.S. job market with growth falling short of expectations and wage increases slowing for the first time in nearly three years. Despite a rise in the unemployment rate to 3.9%, the labor market remains resilient, challenging expectations of an immediate Federal Reserve rate cut. Financial markets are now eyeing a potential rate reduction in September, reflecting a cautiously optimistic outlook as slower wage growth could help temper inflation. https://lnkd.in/didXEq-Q #USJobsReport #Economy #FederalReserve #InterestRates #LaborMarket

In April, the pace of job creation in the US slowed down slightly, falling short of expectations for the first time since November of last year. Employment increased by 175,000, missing the consensus forecast of a 240,000 rise and trailing behind the 315,000 gain seen in the previous month. The unemployment rate ticked up to 3.9%, surpassing the expected 3.8%. Wage growth also decelerated marginally, with a 0.2% increase month-on-month. The Fed is likely to view these numbers favourably, especially with the slower wage growth and stable participation rate, as they could contribute to a more subdued pace of inflation. However Federal is expected to maintain its current stance until there is greater clarity on inflation trends. https://lnkd.in/gHTZdNKE https://lnkd.in/g5pdgjGp #InvestmentManagement #FixedIncome #Mortgages #IncomeReturns #WealthManagement #FinancialPlanning #Investing #AssetManagement #Finance #WealthBuilding

𝐖𝐡𝐚𝐭 𝐝𝐨𝐞𝐬 𝐭𝐨𝐝𝐚𝐲'𝐬 𝐣𝐨𝐛𝐬 𝐝𝐚𝐭𝐚 𝐦𝐞𝐚𝐧𝐬 𝐟𝐨𝐫 𝐭𝐡𝐞 𝐅𝐞𝐝? The latest June employment report indicated that the U.S. job market remains resilient, with payroll gains surpassing expectations. Employers added 206,000 jobs, exceeding the consensus forecast of 190,000. However, revisions to previous months' data have brought the three-month average down to 177,000 jobs added per month. The Fed is likely to view the labor market as easing rather than deteriorating, reinforcing the stance that the current monetary policy is restrictive. "Labor market data once again suggests strength without heat, with payroll gains in recent months pointing to robust demand for workers which has been matched by strong supply stemming from high labor force participation and immigration," Evercore ISI economist Marco Casiraghi said. "But measures of labor tightness such as unemployment, wages, and vacancies are all easing, supporting Powell’s optimistic view on the inflation outlook." Wage growth in June decelerated, aligning with projections, with average hourly earnings growth ranging from 3.5% to 4% over various time frames from one to twelve months. This pace is seen as compatible with the Federal Reserve's inflation target, particularly if productivity continues to rise as it has throughout 2023. The unemployment rate experienced a slight uptick, moving from 4.0% to 4.1%. This marginal increase is attributed to more people entering the labor force, not a reduction in employment. "This will allow the Fed to be patient and wait for additional data, but this remains an inflation-first Fed and developments on real side of the economy mostly affect the bar that inflation needs to hit for policymakers to feel sufficiently confident to cut in September, unless the labor market cracks down," Casiraghi added. Here's what other analysts have to say about today's NFP report: https://lnkd.in/dR2kqj3N #jobs #Fed #NFP #stocks