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The US Labor Market Is Anticipated To Continue To Contract According To The August Jobs Data

Cash Assistance Program
Cash Assistance Program; Source- Forbes

The August jobs report, which is due out Friday morning, could reveal that the US labor market’s expansion slowed down even more.

According to consensus forecasts collected by Bloomberg, the BLS’s monthly labor report, which will be released at 8:30 a.m. ET, is anticipated to indicate that nonfarm payrolls increased by 170,000 in August while the unemployment rate held unchanged at 3.5%. While the unemployment rate decreased to 3.5% in July, the US economy created 187,000 new jobs.

Decline In Employment Growth

Jan Hatzius, the senior economist at Goldman Sachs, noted in a note published ahead of the report that “Big data indications indicate solid but typically decreasing employment growth” and that “August payrolls have displayed a negative bias in the initial prints (subsequently revised higher in each of the last five years). The combination of Hollywood worker strikes (-18K) and Yellow trucker layoffs (-8K) results in a 26K one-time drag, according to our projection.

Jerome Powell, the chair of the Fed, said last week that the rebalancing of the labor market was “incomplete.” Powell has emphasized numerous times that “some softening in labor market conditions” will be necessary to bring inflation back down to the Fed’s target rate of 2%.

In a speech at the Jackson Hole Economic Symposium, Powell stated, “We expect this labor market rebalancing to continue.” A change in monetary policy could also be warranted if there is evidence that the labor market tightness is no longer easing.

Early indications from other economic statistics suggest that the US economy may be slowing down following a stronger-than-expected summer since Powell’s address.

Job Opening For Labour Day

US Labour market

Source- CNBC

Private companies added 177,000 jobs in August, a considerable decrease from the 371,000 positions added in July, according to new ADP statistics released on Wednesday. The most recent Job Opening and Labor Turnover Survey, or JOLTS report, released on Tuesday revealed that for the first time in more than two years, the number of job opportunities in July fell below 9 million. Additionally, a survey of consumer confidence found that Americans are becoming more cautious about the labor market.

All of those data indicators were weaker than predicted by analysts surveyed by Bloomberg, increasing the odds that the Federal Reserve would decide to keep interest rates unchanged at its September meeting. The likelihood that the Fed won’t raise rates at its upcoming meeting has increased from 78% to over 90% in the markets.

According to Oxford Economics’ head US economist Nancy Vanden Houten, “along with other signs of loosening labor market conditions, an August jobs report in line with expectations will allow the Fed to hold interest rates steady at the September 20 policy meeting.”

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