Jobs report surprise adds to case for bigger Fed interest rate cuts

Updated at 8:fifty six AM EDT

The U.S. economy added fewer-than-expected new jobs last month, data indicated Friday, with big downward revisions to recent summer tallies, suggesting a cooling labor put it on the market really is maybe going to cement the case for a bigger Federal Reserve rate.

The Bureau of Labor Statistics reported that a net 142,000 new jobs were created in August, a tally well above the downward revised July total of 89,000 but also well south of this year's monthly average of around 200,000.

Revisions to both the July and June totals removed around 86,000 jobs from the original estimates published by the BLS.

Average hourly earnings rose 0.Four% from July levels and were up 3.8% on an annual basis, with both tallies coming in surprisingly beforehand of Wall Side road forecasts.

The headline unemployment rate edged higher to Four.2%, while the labor force participation rate was unchanged at sixty two.7%.

Economists were having a look out a headline total of around 164,000 new hires within the August report with a headline unemployment rate of Four.2%.

"We do now now not seek or welcome further cooling in labor market conditions," Federal Reserve Chairman Jerome Powell said at some point of his address to the Jackson Hole symposium last month.

"Overall, the economy continues to grow at a pretty good percent. But the inflation and labor market data show an evolving situation," he added. "The upside risks to inflation have diminished. And the downside risks to employment have increased. As we highlighted in our last statement, we're attentive to the hazards to all sides of our dual mandate."

U.S. stocks pared declines following the data liberate, with futures tied to the S&P 500 indicating an opening-bell decline of around 3 points while those linked to the Dow Jones Industrial Average suggests a 5 point dip. The Nasdaq, meanwhile, was indicated 60 points higher.

Related: Jobs report to signal timing and size of autumn Fed interest rate cuts

Benchmark 10-year Treasury note yields fell 3 basis points to three.689% following the data liberate, the lowest since December of last year. Rate-sensitive 2-year notes fell 5 basis points to three.661%.

The CME Group's FedWatch, meanwhile, pegs the odds of a 50 basis point  reduction in September at around fifty seven%, up from forty one% earlier than the data liberate, with two more quarter-point cuts priced in over the final word two meetings of the year.

"Rarely has there been the sort of make or break number – unfortunately, nowadays’s jobs report doesn’t entirely resolve the recession debate," said Seema Shah, chief global strategist at Principal Asset Management. "Significant negative revisions to July’s already weak number, coupled with a softer-than-expected August number, offset the top quality news from the autumn within the unemployment rate and upward thrust in hours worked."

"For the Fed, the decision comes the complete way down to deciding which is the larger risk: reigniting inflation pressures in the event that they cut by 50 basis points or threatening recession in the event that they best cut by 25 basis points," she added. "On balance, with inflation pressures subdued, there may perhaps be no reason for the Fed now now not to err on the side of caution and frontload rate cuts."

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Data on Thursday showed weekly jobless claims slipped by around 5,000 over the week ended Aug. 21, the Labor Department said, with around 227,000 Americans filing their first paperwork for unemployment benefits.

The running total of continued claims, meanwhile, which lag the headline measure by a week, fell to 1.838 million from the right level since 2021 at some point of last month's measuring period.

Payroll processing group ADP's National Employment report, meanwhile, showed deepest sector job creation slowed to Ninety nine,000 last month, with wage growth holding at rates last seen in mid-2021.

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