A monthly revision to the August jobs report showed a combined 86,000 lower revision to payrolls in June and July, but one economist told Yahoo Finance’s Morning Brief that the revision doesn’t necessarily signal further weakness.
“This confirms the cooling trend that we all saw,” said Joe Brusuelas, chief economist at RSM. “I don’t think there’s a risk of a tornado in the labor market.”
Brusuelas noted that an increase of around 100,000 jobs would be enough to stabilize the unemployment rate.
“Going forward, we expect this trend to stabilize at around 100,000 per month,” he said. “In a state of full employment, like the U.S. economy, that’s a good thing, but it’s hard to create a lot of jobs. That’s the reality. And that’s not how it should be, because companies are holding on to workers for years.”
The labor market added 142,000 nonfarm payrolls in August, less than the 165,000 that economists had expected, while the unemployment rate fell slightly to 4.2% from 4.3% in July.
The debate now turns to how much the Fed will cut interest rates, and the answer is not clear.
“We still believe the Fed will stick to a 25 basis point cut at the Federal Open Market Committee meeting in two weeks and pave the way for further rate cuts by the end of the year based on ‘incoming data’ by updating the dot plot,” Raymond James chief economist Eugenio Aleman wrote in response to the report.
However, some expect a 50 basis point rate cut to happen in the near future.
“Our base case is 50 basis points,” Andrew Hollenhorst, chief U.S. economist at Citi Research, wrote, but acknowledged that the report “is not determinative of the size of the September rate cut.”
According to the CME FedWatch tool, the market is pricing in a 40% chance that the Fed will cut interest rates by 50 basis points by the end of its September meeting, up from 30% a week ago.
