Payroll Growth Very Modest In August— Fed Likely To Reduce Interest Rates This Month

Group 1 - The number of payroll jobs grew by only 22,000 in August, significantly below the expected increase of 75,000, indicating a softening labor market [2][5] - Most sectors showed mild contractions in payrolls, with notable growth only in health care (up 31,000), social assistance (up 16,000), and leisure/hospitality (up 28,000) [3] - Federal employment dropped by 15,000 last month, with a total decline of nearly 100,000 since January, and further declines are anticipated as government workers transition from severance pay to unemployment [4] Group 2 - Revisions for previous months showed a decline of 13,000 jobs in June and an increase of 79,000 in July, with the average payroll growth over the past three months at 29,000, the smallest since the pandemic began [5] - Unemployment ticked up to 4.3 percent, with a modest increase in job losers by 32,000, indicating waning confidence among workers in finding jobs quickly [6] - The labor force has been shrinking since January, primarily due to the departure of immigrants, while employers are facing softening consumer spending and declining new investments [7] Group 3 - The report increases the likelihood of the Federal Reserve reducing interest rates in September, despite ongoing inflation concerns, as the Personal Consumption Expenditure index has risen by about 3 percent this year [8] - The balance of concerns has shifted towards the softening job market outweighing the risks of higher prices, although future trends remain uncertain [9]