Jobs Decline Gives Fed Another Reason to Cut Rates in September

by | Sep 6, 2019 | Markets

The Federal Reserve is still on track to cut rates later this month.

All after the U.S. posted softer than expected employment numbers.  

Just this morning, the Labor Department reported the U.S. added just 130,000 new jobs in August 2019.  That marks the smallest increase in three months, and evidence hiring slowed.

Unfortunately, the overall number did fall short of estimates for 150,000 – leaving the unemployment rate unchanged at 3.7%.  

Unfortunately, as businesses have grown cautious about hiring in the trade war, this happens.

Plus, “With so many people on vacation, the number of respondents to the government’s monthly questionnaire is often the lowest of the year,” says MarketWatch. “As more responses are returned, the government usually ends up revising job growth higher.”

There was some better news in this report, though.

Wage growth remained solid, with average hourly earnings up by 0.4% for August, and 3.2% for the year to date.  Both numbers did come in much better than expected. Better, the total number of Americans now employed shot higher by 590,000 to 157.9 million.

Professional and business services added 37,000 new jobs in August 2019.  Healthcare providers added 24,000. Financial services jobs increased by 15,000.  Construction jobs increased by 14,000. Manufacturing added 3,000.  

The only real downfall we’re seeing in the latest report is in retail, which cut 11,100 jobs.

In addition, the labor participation rate did rise to 63.2% from 63%.  That’s a sign that workers who were on the sidelines have been gradually making their way back into the market.  

These Numbers Strengthen the Case for the Fed to Cut

While the jobs numbers weren’t terrible, they still warrant an interest rate cut this month.

“When you look at the evidence of the impact from tariffs, slowing global growth and manufacturing in the U.S., it appears to be a lock,” said Kathy Bostjancic, chief U.S. financial economist at Oxford Economics, as quoted by The New York Times.  “After September, we expect additional rate cuts in October and December as the downside risks are increasing.”