US jobs report reassures but does not move needle enough for Fed

(Alliance News) - The reassuring jobs report in the US was met with a shrug on Friday afternoon, with investors just keen to avoid more negative news.

Toby Sturgeon, global head of Fiduciary Investment Services at Zedra, said: "Ahead of the US non-farm payroll announcement, general sentiment was that if results were negative, there would be an adverse reaction in equity markets, but equally at the same time, if the results were positive, it would also be met with a negative effect on equity markets."

US nonfarm payrolls were in line with forecasts for August, data showed, but the unemployment rate unexpectedly increased.

The US economy added 315,000 jobs last month, the Bureau of Labor Statistics said. This was well below the 526,000 jobs created in July. However, market consensus for August, according to FXStreet, was an addition of 300,000 jobs, meaning August's data was largely as expected.

July's reading was revised down by 2,000 from the 528,000 initially reported, but June's reading was revised 105,000 lower, to 293,000 from 398,000.

"Notable job gains occurred in professional and business services, health care, and retail trade," the bureau noted about August.

Sturgeon continued: "In normal circumstances, if the number was higher than expected, markets should react negatively, especially after Jerome Powell's hawkish comments from his Jackson Hole speech last week, but they have performed marginally positively."

August's print marked the 20th straight month of jobs growth.

"Investors appear relatively pleased with the jobs report despite some initial choppy trade following the release," Oanda's Craig Erlam. "The headline NFP figure was a little larger than expected at 315,000 which may have created that initial unease as a knockout report could have effectively paved the way for a 75 basis point rate hike this month. But once you dig a little deeper, there are aspects of the report that will please the Fed and support the case for easing off the brake."

However, the unemployment rate rose to 3.7% in August from 3.5% in July, having been expected to remain stable.

Capital Economics Senior US Economist Michael Pearce said: "The increase in the unemployment rate in August, to 3.7% from 3.5%, only happened because the labour force rose by 786,000, easily outpacing the 442,000 increase in household measure of employment.

"Nevertheless, the strength of the latter still closed some of the gap that had opened up between the household and payroll measures of employment. The rebound in the labour force takes it above pre-pandemic levels, though the participation rate is still lagging, particularly for older workers."

Annual wage growth matched July's figure of 5.3%. On a monthly basis, pay increased 0.3%, slowing from the previous month's rise of 0.5%.

Oanda's Erlam said: "All of this will be a relief to policymakers but I'm not sure it will be enough to change their minds at this point.

"There's been such an effort to put 75 basis points on the table in recent weeks, to change their mind on the back of this would seriously undermine their guidance in future. If paired with another decent drop in inflation in a couple of weeks, more may be convinced."

By Paul McGowan; [email protected]

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