The US labor market showed signs of recovery in August, with employers adding an estimated 142,000 jobs, following a revised 89,000 increase in July, according to data released by the Bureau of Labor Statistics on Friday.
The unemployment rate fell to 4.2% from 4.3%, matching economists' expectations, but job growth fell short of the forecasted 160,000 gain.
Wage growth also exceeded expectations, with average hourly earnings rising by 0.4% month-over-month, pushing the annual rate up to 3.8%.
The August report reflects a mixed picture for the labor market, according to Michael Brown Senior Research Strategist at Pepperstone.
Brown noted that while the payroll increase was within the expected range, a two-month net revision of -86,000 jobs dampened some optimism. Brown also highlighted that the dip in unemployment and steady labor force participation at 62.7%—near cycle highs—provided a degree of reassurance.
“All of this does little to clear-up the debate over the September Fed meeting,” Brown commented.
“Doves will point to a cooling pace of headline payrolls growth as potential reasoning for a larger 50bp cut. Hawks, meanwhile, will reasonably point towards the lack of further cooling compared to the July report, and hot-ish earnings growth, as reasons to kick-off the normalization cycle with a more modest 25bp move.”
US Treasuries rallied, led by short-term yields, as markets priced in expectations of additional Fed easing by year-end. Stocks edged higher, and the dollar weakened, with the DXY index slipping below the 101 mark.
Fed officials, including John Williams and Christopher Waller, are expected to provide further clarity on the policy outlook in remarks later today.