The American labor market weakened last month as employers added just 142,000 jobs in August — well below analyst estimates of 161,000.
Stock market futures plummeted before the opening bell on Friday as the Labor Department also issued downward revisions from July — when the economy added just 89,000 as opposed to the originally reported 114,000.
At the same time, unemployment ticked down to 4.2%.
In that scenario, the Fed may seek to deliver a stimulus with a larger-than-usual interest rate cut of a half-percentage point when it meets later this month.
A sluggish hiring report will also fuel former President Donald Trump’s claims that the Biden-Harris administration has overseen a worsening economy.
Reductions in the Fed’s benchmark rate will eventually lead to lower borrowing costs for a range of consumer and business loans, including mortgages, auto loans and credit cards.
Recent economic data has been mixed, elevating the importance of the jobs report, which is among the more comprehensive economic snapshots the government issues.
The Labor Department surveys roughly 119,000 businesses and government agencies and 60,000 households each month to compile the employment data.
On the weaker side, companies are advertising fewer job openings, and fewer workers are quitting for new opportunities. In a healthy job market, workers are more likely to quit, usually for new, higher-paying opportunities.
With quits declining, that means fewer jobs are opening up for people out of work.
The Fed’s Beige Book, a collection of anecdotes from the 12 regional Fed banks, reported that many employers appeared to have become pickier about whom they hired in July and August.
And a survey by the Conference Board in August found that the proportion of Americans who think jobs are hard to find has been rising, a trend that has often correlated with a higher unemployment rate.
At the same time, consumer spending, the principal driver of economic growth in the United States, rose at a healthy pace in July.
And the economy grew at a solid 3% annual pace in the April-June quarter.
Fed Chair Jerome Powell has made clear that he doesn’t want to see the job market weaken further.
Christopher Waller, a member of the Fed’s Board of Governors, is scheduled to discuss the economic outlook in a speech at the University of Notre Dame later on Friday.
Waller, an influential member of the governing board, may provide insights into the Fed’s next moves.
Substantial rate cuts by the Fed could spur some companies to start hiring more quickly, some labor market experts say.
“Everyone’s in a bit of a holding pattern,” said Becky Frankiewicz, president of North America at staffing giant Manpower.
“Everyone’s watching that mid-September meeting, to free up and start spending.”
With Post Wires
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