ZINGER KEY POINTS
- Mixed signals as job creation beats expectations, unemployment edges up, and wage growth slows.
- Traders lowered rate hike bets, cementing expectations that the Fed will keep rates unchanged this month.
The August jobs report released by the Bureau of Labor Statistics on Friday indicated a mixed picture for the U.S. labor market, as job creation exceeded expectations, but simultaneously, the unemployment rate inched upward and wage growth moderated more than expected.
Non-Farm Payrolls Exceed Predictions:
August’s non-farm payroll growth came in at 187,000, a robust increase from the downwardly revised July figure of 157,000, and surpassing the projected figure of 170,000. While employment creation among American companies is tracking slightly below the six-month average, it remains stronger than what was initially forecasted.
The total non farm payroll employment figures for June were adjusted downward by 80,000, shifting from a previously reported increase of 185,000 to 105,000. Likewise, the July figures saw a revision, decreasing by 30,000, from 187,000 to 157,000.
Unemployment Rate Edges Up:
The unemployment rate saw an uptick, rising from 3.5% to 3.8%, contrary to expectations of 3.5%. The number of unemployed persons rose by 514,000 to 6.4 million.
The increase in unemployment, coupled with the reduction in job openings to 8.8 million, marks a general rebalancing trend between demand and supply in the labor market.
Wage Growth Slows:
Wage dynamics are starting to mirror the broader cooling of the U.S. labor market. Average hourly earnings grew by 4.3% year-on-year, falling short of the anticipated 4.4%. On a monthly basis, the rate of increase slowed to 0.2%, a notable deceleration compared to July’s 0.4% and the expected 0.3%.
These figures may further solidify market beliefs that the Federal Reserve will maintain interest rates at their current levels in September.
Market Reactions: Dollar, US Yield Fall As Rate Hike Fears Fade
The U.S. dollar index, as tracked by the Invesco DB USD Index Bullish Fund ETF fell 0.3% minutes after the release.
The rate-sensitive two-year Treasury yields fell over 7 basis points to 4.79%, at the lowest in more than two weeks.
Traders further adjusted September’s rate predictions, assigning a mere 7% chance to a rate hike, down from 12% a day earlier.
U.S. equity futures rose ahead of the opening bells in New York. The SPDR S&P 500 ETF Trust is up 0.7% in premarket trading.
Chart: US Dollar Reaction To August Jobs Report
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Originally Posted September 1, 2023 – August Job Creation Tops Forecasts, But Unemployment Ticks Higher, Wage Growth Slows
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