August Employment Report to Influence the Size of Fed’s Rate Cut

The much-anticipated August employment report will be a key factor in the size of the next interest rate cut to be announced by the Federal Reserve in mid-September.  

Key Takeaways

➔ The BLS is going to release the monthly jobs report for August today.

➔ The data will shed light on the status of the employment scenario in the US.

➔ The report will certainly influence how the Fed decides the next rate cut later this month.

The Bureau of Labour Statistics (BLS) is set to release the August jobs report at 8:30 AM ET on 6th of September. The report will shed light on the pace at which the US labour market is slowing down.

The schedule of the report is also very interesting as the Fed is set to announce whether it will announce a rate cut during its next meeting on 18th of September. The Fed initiated its inflation-fighting tightening cycle 30 months ago. As per estimates, the report is expected to show:

► Non-farm payrolls rose by 165,000 in August compared to 114,000 in July.
 

► The unemployment rate declined to 4.2% in August compared to 4.3% in July.
 

► Average hourly earnings grew 0.3% month-on-month in August compared to 0.2% in July.  
 

► Average hourly earnings grew 3.7% year over year in August compared to 3.6% in July.
 

► Average weekly hours worked were 34.3 hours in August compared to 34.2 hours in July.

Remember that in July, the employment report sparked global fear about the US economy entering a long recession. The sentiment led to a global market sell-off.

Read More: Sell-Off Echoes Across Asia-Pacific Markets

As per the estimates, the report could suggest that the labour market is relatively stable, and the fear of job losses is exaggerated. In an otherwise situation, the fear of unemployment would not be exaggerated. In either case, the data will influence the Fed’s rate cut decision big time. Note that the Fed Chair Jerome Powell said in a meeting last month:

“The cooling in labour market conditions is unmistakable. Job gains remain solid but have slowed this year... We do not seek or welcome further cooling in labour market conditions.”

Economists said they expected a weak August jobs report leading to a rate cut by 50 basis points later this month. We will wait until the official data is released to discuss the subject in detail.