The US Bureau of Statistics published the employment report for the month of August. 315 thousand jobs were added to the American economy when economists’ expectations were 300 thousand jobs. Unemployment stood at 3.7% compared to analysts’ expectations of 3.5% and the growth in hourly wages stood at 5.2% while analysts expected a growth of 5.3%. In July, the market was surprised by the data when 528 thousand jobs were added (well beyond the forecast).
A below-expected report, while the unemployment rate is rising is something the market likes, the Federal Reserve has announced several times that it wants to see the unemployment rate rise and the job market weaken. This helps inflationary pressures. Less “competition” for each job, hence lower salaries which ultimately helps inflation and the American consumer to spend less
That is, a weak employment report will strengthen the estimates that the direction is a slow increase in interest rates and that the transition to a decrease in interest rates is beyond the cycle (some believe that it is a matter of 4-5 months). And if so – the stock market is expected to be positive.
The employment report for the month of July showed, as mentioned, an addition of 528,000 jobs – double what was expected. Against this background, the stock market then reacted with declines, and later Powell raised the interest rate sharply (along with other parameters that caused him to make this decision).
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