The August jobs report dropped this week and wasn’t what many experts expected. As concerns about the US economy grow, the jobs report is one of the indicators of the health of the world’s largest economy. After a lackluster July, this month’s report would indicate whether the government would go forward with its projected interest rate change. The August jobs report was not much better and has many people worried.
August Jobs Report
Analysts projected there would be about 160,000 jobs added in the month of August. However, the number was slightly lower than the projection. Only 142,000 jobs were added. This is now the third month in a row where the jobs were below the projections. One piece of good news was the unemployment rate fell from 4.3% to 4.2%. Construction and healthcare were the industries that saw the most growth in terms of jobs. On the flip side, manufacturing and retail were the industries that cut jobs as the summer ended.
These reports are even more critical during an election year. The economy has been a hot-button issue for Donald Trump and Kamala Harris on the campaign trail. Both camps are doing their best to spin the August jobs report in their favor. The Fed has been hinting at rate drops in September, but some wondered whether a strong jobs report would cause them to rethink. That does not seem to be the case.
Likely Rate Drop
A rate drop would not be the most shocking thing, as the Fed has been hinting at it for months now. However, the August jobs report almost seals the deal. At this point, it is a matter of how much the drop will be. Most analysts are expecting a 0.25 percentage point cut. In the grand scheme of things, this isn’t a huge drop. As prices soared in 2022, the Fed raised the key lending rate to a 20-year high. While this has been good on some levels, consumers have been dealing with higher borrowing levels. This is especially seen in the housing market, where prices have gone up with the interest rate, making buying a home expensive.
Seema Shah, chief global strategist at Principal Asset Management, believes the Fed should proceed with its scheduled rate cut after the August jobs report. “On balance, with inflation pressures subdued, there is no reason for the Fed not to err on the side of caution and frontload rate cuts,” she said after the August jobs report came out. Her point is valid. Erring on the side of caution is likely the best option. In the coming months, the jobs reports will be highly anticipated as they could signal further rate drops or an economy that is stabilizing.
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