Although the headlines from the U.S. August non-farm payroll data presented a positive picture, analysts noted that excluding one-off factors, the underlying growth in the labor market remains much more limited. In August, non-farm payroll employment increased by 162,000, significantly exceeding market expectations of 56,000. Data for previous months was also revised upward by 55,000, with the change in July employment adjusted from a decrease of 23,000 to an increase of 21,000.
However, analysts pointed out that if the recovery in the entertainment and hospitality sectors is excluded, along with the temporary impact on public sector and education employment, the growth in core employment in August remained around 60,000. This has been interpreted as evidence that the labor market may not be as strong as the headline data suggests.
According to the report, the unemployment rate in August remained steady at 4.1 percent, while the labor force participation rate rose to 61.6 percent. The broader U6 unemployment measure fell from 7.9 percent to 7.7 percent. Analysts noted that the number of workers returning to the labor force is still being met by company demand, and that there is some improvement in the quality of employment.
On the other hand, the year-over-year growth in average hourly earnings fell from 3.2% to 3.1%, remaining below the consumer inflation rate of 3.4% in July. This indicates no resurgence of significant overheating in the labor market.
Analysts at GF Securities stated that the August employment data weakened both extreme scenarios: "employment collapse" and "labor market overheating again." In the firm's view, the resilience of the labor market has increased confidence that the economy can withstand further monetary policy tightening by the Fed, raising the likelihood of a year-end rate hike. However, it is expected that the deciding factor for whether a rate hike occurs at the September meeting will be the August inflation data.
Following the data release, the probability of a Fed rate hike in September increased from 50% to 58.6%, according to the FedWatch indicator. The yield on the two-year U.S. Treasury note rose by 4 basis points to 4.37%, while the yield on the ten-year Treasury note increased by 1 basis point to 4.78%. Major U.S. stock indexes closed slightly lower, while shares of companies involved in artificial intelligence equipment development and the semiconductor industry rose. The SOXX ETF, which tracks the Philadelphia Semiconductor Index, gained 3%.
*This is not investment advice.
end-content
