US Non-farm payrolls show solid additions

US economy adds 142,000 jobs in August as the Fed plans to cut interest rates

06 September 2024

US non-farm payrolls came in at a solid 142,000 job additions, a reasonable recovery from last month’s disappointing 114,000 figure which had arguably contributed to the early August equity market sell-off and was actually revised down further to 86,000. Hourly earnings also grew 0.4% over the previous month, twice the pace of July. Crucially, the latest print still hints at a ‘goldilocks economy’, with the latest additions neither too low to reinforce outright recession fears that had been growing again (unreasonably, in our view) earlier this week nor too high to suggest that the US Federal Reserve (Fed) should reassess its open desire to start loosening monetary policy later this month and declare victory over inflation.

The three-month moving average of the job additions now stands at 116,000, which speaks of on-going economic expansion, albeit at a slower pace than previously. Taken together, the report demonstrates generally that the US economy should never be discounted and specifically that a soft landing might still be possible. At last month’s Jackson Hole symposium Jay Powell stated somewhat bravely (given the credibility-damaging episodes of 2021-22 and late 2023) that “The time has come for policy to adjust.”

Both he and his Fed colleagues should take comfort that this major data release reveals nothing that forces a U-turn on their open desire to cut rates, nor pushes them into an emergency-style 50 basis points (bps) cut. Gradually lower rates now seem inevitable from here. What is less certain is exactly how already-richly valued and increasingly volatile US equity markets will respond.