Analysis of US August Employment Data: Non-farm data does not strengthen the necessity of a 50 basis point rate cut in September

According to the Wise Finance APP, on September 6th, the U.S. Bureau of Labor Statistics (BLS) released the following data for August 2024: non-farm payroll employment increased by 142,000, compared to the previous value of 114,000; the unemployment rate fell to 4.2%, down from 4.3%. China Merchants Securities released a research report stating that the details of the August U.S. non-farm data were mixed, indicating a continued cooling of the labor market overall, but with a marginal slowdown in the pace, which did not strengthen the necessity of a 50 basis point rate cut in September. The U.S. bond yield curve finally ended its inversion, and U.S. stocks remained under pressure amid cooling fundamental expectations.

1. In August, non-farm payrolls increased by 142,000, lower than the market's expectation of 165,000. Although the initial value of non-farm payroll additions in August rebounded from the initial value in July, the data for the previous month was significantly revised downwards. The non-farm payroll addition data for July was revised down from the initial value of 114,000 to 89,000, and for June, it was revised down from 179,000 to 118,000, totaling a downward revision of 86,000.

2. Looking at different industries, the manufacturing sector showed a significant cooling, with a decrease of 24,000 jobs (compared to an increase of 6,000 jobs previously), consistent with the situation reflected by the August U.S. ISM Manufacturing New Orders Index falling to 44.6% (from 47.4%). The main driving sectors were still education and healthcare services, with healthcare and social assistance adding 44,000 jobs (previously 59,000 jobs). The government sector added 24,000 jobs (previously 15,000 jobs), with non-cyclical education, healthcare, and government sectors combined accounting for nearly half of the overall non-farm payroll additions. Temporary support services saw a narrowing decline of 2,900 jobs (previously 18,000 jobs), business services turned positive, adding 8,000 jobs (previously losing 13,000 jobs). Leisure and hospitality saw a rebound in additions to 46,000 jobs (previously 24,000 jobs), with no clear signs of cooling in service sector consumption.

3. Hourly wage growth and average weekly hours rebounded. Hourly wage growth increased to 0.4% month-on-month (from 0.2%), and rebounded to 3.8% year-on-year (from 3.6%). In August, the average weekly hours in the private sector rebounded to 34.3 hours (from 34.2 hours), with the Beige Book released on the 5th reporting some regions where companies reduced hours and shifts, serving as an early signal of cooling employment levels. It is still necessary to observe whether the average weekly hours in the private sector will rapidly weaken in the future.

4. The unemployment rate in August fell to 4.2% (from 4.3%), while the labor force participation rate remained flat at 62.7% (from 62.7%). The labor force participation rate for the 25-54 age group slightly adjusted to 83.9% (from 84.0%), while the youth group's participation rate remained weak. However, the labor force participation rate for the 55 and older group rose to 38.6% (from 38.3%). Considering the decline in the unemployment rate and the rebound in average weekly hours in the private sector, the rate of cooling in the labor market has marginally slowed, reducing the urgency for a 50 basis point rate cut by the Federal Reserve in September.

After the data release, New York Fed President Williams stated that the time for a rate cut has come, and the Federal Reserve has made progress towards its dual goals of price stability and full employment, with risks now balanced. The U.S. bond yield curve is no longer inverted, with the 2-year and 10-year Treasury yields both falling to around 3.704%. CME data shows that the probability of a 50 basis point rate cut in September is around 43%, but a 25 basis point cut remains the most likely scenario Due to factors such as the weakening of the US PMI data released this week, the rapid decline in the job vacancy rate to 4.6% (from 4.8% previously), and the Federal Reserve's Beige Book reflecting economic activity remaining flat or declining in nine regions compared to five in the previous period, overseas markets have once again heated up their expectations of a weakening US economic fundamentals. The details of the August non-farm payroll data overall indicate a marginal slowdown in the cooling pace of the labor market, which did not boost the necessity of a 50 basis point rate cut in September, leading to a pullback in the three major US stock indices.

Risk Warning:

Federal Reserve policy exceeding expectations.