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James Knightley, chief international economist at ING, notes that the US payrolls rose 130,000 in August, below the 160,000 consensus and there was a net downward revision of 20,000 to the previous two months of data.

Key Quotes

“Private payrolls rose just 96,000, which is a three-month low and is clearly disappointing given other evidence such as from the National Federation of Independent Businesses, ADP and ISM non-manufacturing surveys.”

“The number could have been worse were it not for the 25,000 government workers hired to conduct the upcoming census. Furthermore, the ISM manufacturing employment index was at levels consistent with a 10,000 drop in manufacturing employment, though we got a 3000 rise instead.”

“Payrolls growth is trending lower. It may in part be due to the difficulty in finding workers with the right skill sets given unemployment remains just 3.7%. However, given creeping caution about the international backdrop and uncertainty on trade, firms may be increasingly cautious about hiring too.”

“On the clear positive side of the equation, we have got another really good wage number of +0.4% month-on-month following three consecutive 0.3% readings. As such, the three-month annualised rate is up to 4.2% and you have to go all the way back before the financial crisis to have had that.”

“Given this economic backdrop, Federal Reserve officials are understandably reluctant to bow to President Trump’s demands for aggressive rate cuts and are seemingly pushing back against market expectations of upwards of 100 basis points of easing priced in for the next 12 months.”

“For now, we continue to look for 25bp Federal Reserve rate cuts at both the 18 September and 11 December FOMC meetings.”