Mixed jobs report adds to US economy concerns
On September 6, 2024, 9:35 PM
Job growth in the US was weaker than expected last month, raising concern that the worldâs largest economy is starting to stumble under the weight of higher interest rates.
Employers added 142,000 jobs in August, less than the roughly 160,000 analysts had forecast, the Labor Department said. It also said job gains in the previous two months were lower than initially estimated.
However, the unemployment rate fell back, dropping to 4.2% from 4.3% in July.
The report is one of the most important gauges of the US economy and comes at a critical time, as voters weigh presidential candidates for the November election and the US central bank debates its first cut to interest rates in four years.
Analysts said the latest figures kept the Federal Reserve on track for a rate cut at its meeting this month, but would do little to resolve questions about the direction of the US economy or how big a cut it should make.
âRarely has there been such a make or break number â unfortunately, todayâs jobs report doesnât entirely resolve the recession debate,â said Seema Shah, chief global strategist at Principal Asset Management.
Soaring prices in 2022 prompted the Federal Reserve to raise its key lending rate to 5.3%, a roughly 20-year high.
Faced with higher borrowing costs for homes, cars and other debt, the economy has slowed, helping to ease pressures that were fuelling inflation, but adding to market jitters.
As inflation has subsided, falling to 2.9% in July, the Fed is now under pressure to cut rates and ward off further economic slowing.
The job gains in August, although below estimates, were higher than July, when a slowdown sparked fears and prompted several days of stock market turmoil.
Construction and healthcare firms led the hiring last month, while manufacturers and retailers got rid of roles.
Ms Shah said the data in Fridayâs report was mixed, but contained enough worrying signs that the Fed should make a bigger cut.
âOn balance, with inflation pressures subdued, there is no reason for the Fed not to err on the side of caution and frontload rate cuts,â she said.
But others said the gains were just steady enough to warrant a 0.25 percentage point cut, as markets have long predicted â though it might be a sign of more cuts than expected in the months ahead.
The Fedâs decision would be âclose runâ, said Paul Ashworth, chief North America economist for Capital Economics.
âThe labour market is clearly experiencing a marked slowdown,â he said, adding that the latest figures were âoverall still consistent with an economy experiencing a soft landing rather than plummeting into recessionâ.
The concerns about the economy are a key issue in the US election.
Polls suggest that a majority of Americans already believe the US is experiencing a recession, despite solid 2.5% growth last year.
Donald Trump has claimed that the economy is headed for a âcrashâ and his campaign quickly seized on the latest figures to attack vice president Kamala Harris, issuing a press release titled âwarning lights flash as Kamalaâs economy keeps weakeningâ.
Democrats have defended their record, arguing that the US weathered the pandemic and inflation better than many other countries.
They say that the slowdown is a sign of an economy returning to a more sustainable pace of growth after the post-pandemic boom.
âAlthough hiring has slowed, the US job market continues to generate solid job gains and wage growth that is consistently beating inflation,â the White House Council of Economic Advisors said in a blog.
