US non-farm payrolls grow by 142,000 in August, miss forecasts

Job growth in the US picked up only a little in August.

According to the Department of Labor, non-farm payrolls grew by 142,000 last month.

Economists had forecast an increase of 161,000, according to a poll by Dow Jones Newswires.

Furthermore, non-farm payrolls figures for the previous two months combined were revised down by a combined 86,000, to 89,000 and 118,000, respectively.

Payroll growth was split between 118,000 in the private sector and 24,000 in government.

By sectors, manufacturing shed 24,000 persons but private services providers added 108,000.

Average hourly earnings however rose by a strong 0.4% month-on-month (consensus: 0.3%).

As well, the rate of unemployment, which is derived from a separate survey than that for the payroll numbers, ticked lower to 4.2% (consensus: 4.2%).

The labour force participation rate was unchanged at 62.7%.

"The 142,000 gain in non-farm payroll employment in August was probably just enough to tip the Fed in favour of a measured 25bp rate cut this month, rather than a more dramatic move, but the labour market is clearly experiencing a marked slowdown," said Paul Ashworth, chief North America economist at Capital Economics.

For his part, Holger Schmieding, chief economist at Berenberg, said: "The US labour market continues to lose momentum. However, the downtrend is not bad enough, in our view, to require a headline-grabbing 50bp rate cut at the Fed’s next meeting on 18 September.

"Instead, the modest rebound in payroll gains in August after a weak July, coupled with the slight decline in the unemployment rate and an uptick in wage inflation, suggests that the Fed can proceed more cautiously, lowering rates by 25bp at each of its remaining three meetings this year. Thereafter, the Fed could slow the pace – cutting once a quarter in H1 2025, before stopping at a 4-4.25% Fed funds band in mid-2025. Of course, the risk to our Fed call is tilted towards more aggressive Fed action."

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