Executive summary
U.S. payrolls added 142,000 jobs in August, missing the consensus expectations of 165,000. Downward revisions lowered the prior two months by 86,000, taking the six-month average job gain to 174,000 (from 193,800 previously).
The cooling trend continued in August. However, the unemployment rate dropped to 4.2%, while both hourly earnings and hours worked ticked upward. In a historical context, none of these are weak.
Ultimately, the U.S. economy is cooling but not weak, particularly compared to pre-pandemic trends for the broader economy (i.e., gross domestic product (GDP), retail sales, etc.). That is especially so given noise within some of the economic data recently, particularly in July, which was impacted by Hurricane Beryl. Instead, we chalk it up to further normalization, albeit uneven. Accordingly, we believe that the Federal Reserve (Fed) remains on track for a quarter point (0.25%) rate cut at the September meeting.
