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US: Employment report weaker by all accounts – Wells Fargo

The official US employment report showed that the US economy added 315,000 jobs in August, slightly above expectations of 300,000; the unemployment rate unexpectedly rose from 3.5% to 3.7%. According to Wells Fargo analysts, Today’s data, in isolation, tips the balance towards a 50 basis point interest rate hike at the Fed’s September meeting, but does not resolve the issue by itself. Although the August employment report keeps hopes alive that the Fed can pull off the elusive soft landing, there is still significant work ahead to quell inflationary pressures coming from the labor market, analysts say.

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“The labor market cooled in all the right ways in August, at least as far as the Fed is concerned. Nonfarm payrolls rose by 315,000 last month, almost in line with consensus expectations and with industry gains a The pace marks a downward shift from the previous three-month downwardly revised average of 402,000, but still a robust gain in its own right.”

“Although the more moderate increase in payrolls suggests a somewhat weaker demand for workers, a more balanced picture of the labor market is emerging thanks also to the improvement in supply.”

“The slowdown in hiring in August helps close the gap that had opened up between nonfarm payroll growth and labor market measures in recent months.”

“Today’s report, taken in isolation, tips the scales towards a 50 basis point hike at the September FOMC meeting, but does not by itself resolve the issue. With the Fed focused on inflation, the August CPI will offer the last major piece of the puzzle of 50 vs. 75 bps But we don’t see anything in the August jobs report to alter the overall trajectory: rate hikes are very likely to last beyond September and continue remain tight for an extended period. We expect to see more definite signs of a weakening labor market in the future, as the FOMC increasingly recognizes that a cooler labor market will be necessary to quell inflation in the long run.”

Source: Fx Street

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