TMGM Group reports that employment growth in the United States rebounded in August, following lower-than-initially-reported growth figures over the summer. According to the Labor Department data, the U.S. economy added 142,000 jobs, a number higher than that of July, which had sparked concerns of an economic slowdown and rattled global financial markets. The unemployment rate in August fell to 4.2%.
The latest non-farm payroll report might not definitively resolve whether the Federal Reserve will cut interest rates by 25 basis points or 50 basis points in September to preempt potential labor market weakness. This jobs report won’t change anyone’s pre-set stance. It supports those who believe the Fed will cut rates by 25 basis points due to its indication of ongoing labor market resilience, while the downward revision of previous figures justifies a potential cut of 50 basis points.
Economically, it is evident that the economy is slowing. Therefore, the real discussion for the Federal Reserve is: where do you think the rate ultimately should be? Or, what level do you think you must reach? Because I believe this plays a crucial role in the scale of actions you will take.
In a speech shortly after the employment data release, New York Fed President Williams echoed recent comments from other Fed officials, signaling that a rate cut is imminent. Now is the appropriate time to reduce the degree of policy restraint by lowering the target range for the federal funds rate. With the inflation rate close to the Fed’s 2% target and the economy balanced, the monetary policy stance can gradually shift to a more neutral state over time. Fed Governor Waller also stated that maintaining economic momentum means the time has come to start lowering policy rates at the upcoming meeting.
The non-farm payroll report is one of the most anticipated economic indicators over the years, and the August report coincides with the Fed preparing to cut interest rates. Since 2022, investors and the Fed have been monitoring inflation for signs of an overheating U.S. economy. But with price pressures easing in recent months, economists have shifted their attention to worrying signs in the labor market, which has previously brought broad benefits to Americans through higher pay and increased productivity.
One big question in recent weeks is whether the summer market turmoil was temporary, caused by hurricanes curbing hiring, or evidence of an overall economic slowdown. The answer to this could become a key factor in determining the outcome of the U.S. presidential election, with Vice President Harris widely promoting the extension of Biden's agenda, while Republican candidate Trump promises to restore the U.S. economy to pre-pandemic levels.
Market Analysis:
The daily chart of the U.S. Dollar Index shows a rebound at the bottom. Additionally, the MACD dual lines and volume bars have further expanded. A series of weak economic data in early August shocked Wall Street, leading to a global sell-off that temporarily plunged the record-breaking U.S. stock market into one of its most volatile periods in years.
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