HIRING IN U.S. COOLS
Path to Fed cuts
The American labor market added 142,000 jobs in August — a relatively weak number that paves the way for the Federal Reserve to finally start cutting interest rates when it meets later this month.
The latest jobs figures didn’t add up to a clear message for Wall Street. Last month’s number fell short of the 161,000 jobs economists had expected, and the two previous months were revised lower by a combined 86,000 positions.
Still, August’s highly anticipated reading was better than July’s revised tally of 89,000 — the smallest since the pandemic — and the unemployment rate ticked lower to 4.2%.
“The labor market is weakening,” said Eugenio Aleman, chief economist at Raymond James Financial. “It is not falling apart, but it is weakening.”
The Dow Jones Industrial Average and Nasdaq lost more than 400 points on uncertainty around the labor market and the prospects for rate cuts. The S&P 500 fell 1.7% — ending its worst week in a year.
The Fed is set to meet on Sept. 17 and 18. Traders on Friday raised their bets to about 50-50 that the central bank will lower its benchmark lending rate by half a percentage point, versus a more typical, quarter-point reduction.
Christopher Waller, one of seven members of the Fed’s board of governors, said Friday that the latest jobs data “indicates to me that the labor market is continuing to soften but not deteriorate, and this judgment is important to our upcoming decision.”
Uneven gains
Waller said the Fed will most likely issue a series of modest rate cuts, though he added he would be open to an accelerated timetable if data indicated further cooling of the labor market.
When inflation was soaring in 2022 and 2023, the Fed hiked rates by 50 and 75 basis points at a time until the benchmark rate reached around 5.3%.
“I was a big advocate of front-loading rate hikes when inflation accelerated in 2022, and I will be an advocate of front-loading rate cuts if that is appropriate,” Waller said.
August’s job gains were concentrated in just a few industries, with health care adding 44,000 jobs; restaurants, hotels and entertainment companies, 46,000; and construction, 34,000.
Hospitality hiring could reflect ongoing gains in consumer spending, which rose last month even after adjusting for inflation. Manufacturers and retailers cut jobs in August.