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US job growth was stronger than expected in August but was revised down significantly over the previous two months, another sign of a slowdown in the world’s largest economy and likely to heighten expectations that the Fed will hold off on further interest rate hikes this year. . year.
The U.S. economy added 187,000 new nonfarm jobs during the month, according to data published by the Bureau of Labor Statistics on Friday, the third straight month of gains of less than 200,000. The figures for July and June were revised down by 110,000 combined.
Investors and policymakers are closely monitoring any signs of a slowing US labor market, where jobs and wage growth are major contributors to inflation.
The unemployment rate also rose to 3.8 percent, in contrast to economists’ expectations that it would remain steady near multi-decade lows of 3.5 percent.
Average hourly earnings rose 0.2 percent month-over-month and 4.3 percent year-over-year, a slight decline from the previous month, but well above levels considered consistent with meeting the Federal Reserve’s 2 percent inflation target. The hundred.
Inflation has fallen significantly from its peak of more than 9 per cent last year, and the headline rate of consumer price inflation recently reached 3.2 per cent in July.
However, economists warned that continued strength in the labor market could make it difficult to close the remaining gap to meet the Fed’s inflation target.
Citi economists Andrew Hollenhorst and Veronica Clark noted earlier this week that “one of the clearest risks to the continued mitigation of inflation was the flexible labor market.” “Most officials [expect] Some softening in the labor market and higher unemployment even under the ideal “soft landing” scenario.
Separate data published earlier this week indicated that labor demand is easing, with the number of vacancies falling more than expected.
The vast majority of investors expect the central bank to hold interest rates steady at its next meeting in late September, but the outlook for the rest of the year is less certain. The futures markets were pricing in a little less than 50 per cent chance that interest rates would rise by the next meeting in November.
In his annual speech at the Federal Reserve’s Economic Symposium in Jackson Hole, Wyoming, last week, Fed Chair Jay Powell stressed that the central bank is “willing to raise interest rates further if appropriate,” but said policymakers would be careful as they tried. Achieving balance in controlling inflation. while minimizing damage to the broader economy.