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WASHINGTON: Employment growth in the United States slowed more than expected in August, due to the US trade war with China and the prospect of a reduction in reserve rates federal this month.
Non-farm payroll increased by 130,000, about 28,000 less than expected, and down 29,000 from July, but average hourly earnings increased slightly and unemployment rates remained stable.
"It's at best a mixed report," said Nela Richardson, investment strategist at Edward Jones in St. Louis, which confirms what we knew, that the economy was slowing down. "
SLUMP FACTORY
As a sign that the trade war was weighing on the economy, employers created 3,000 jobs in factories in August, less than half of the projected 8,000 jobs and a drop from the 4,000 jobs created in July. The manufacturing sector "is the sector to watch for the link between commercial uncertainty and the real economy," Richardson said.
Transportation and warehousing jobs, which affect trade and manufacturing, fell by 0.5%.
(Graph: Trade War Link: https://fingfx.thomsonreuters.com/gfx/mkt/12/5823/5757/trade_war.png)
Retail trade jobs fell for the seventh consecutive month, indicating that US retailers may be more troubled than expected. "I know we just had Labor Day, but they continue to cut jobs that do not affect anyone," said J.J. Kinahan, senior market strategist at TD Ameritrade in Chicago.
(Graph: retail_woes link: https://fingfx.thomsonreuters.com/gfx/mkt/12/5821/5755/retail_woes.png)
"JOLI DARN GOOD SHAPE"
Federal jobs increased by 34,000, mainly thanks to the creation of 25,000 temporary jobs related to the US Census of 2020. "This is not repeatable," Kinahan said. "So, it's a little bump a month, so maybe it worries you a little bit."
US officials said the report showed that President Donald Trump's policies were a success. "The United States is working," White House economic adviser Larry Kudlow told Bloomberg after the report was released. "We are in very good shape."
DIRECT WOMEN
One positive point has been the increase in the number of women of working age who are working or looking for work. Women's participation led to a rebound in overall labor force participation, which rose 0.2% in August to 63.2%. The participation of women aged 25 to 54 increased by one percentage point to 76.3%.
(Graphic: Women_lead link: https://fingfx.thomsonreuters.com/gfx/mkt/12/5824/5758/Women_lead.png)
"In recent years, we have found that women are truly pioneers in labor market participation," said Nick Bunker, economist at Indeed Hire Lab. Women represent a disproportionate share of workers in some sectors that have strong job creation, such as health care and education, he said.
MORE HOURS
As job growth slowed down, US employees were working more hours. The Labor Department said an index of hours worked in the economy as a whole had risen 0.4% in August. The growth of this index, which economists see as an early indicator of economic growth, has slowed for much of this year.
This reading could indicate a slowdown in growth, rather than a clear reversal towards economic contraction.
(Graph: agg_hours link: https://fingfx.thomsonreuters.com/gfx/mkt/12/5820/5754/agg_hours_gdp.png)
COVERAGE RATES AHEAD Stock markets rose early in the session as the weaker report reinforced investors' belief that the Federal Reserve will cut interest rates by 25 basis points when it political meeting on 17-18 September.
"This report will not change what the Fed will do this month," said Bill Merz, head of fixed income research at the US bank, in Minneapolis wealth management.
(Report by Heather Timmons and Jason Lange in Washington and Jonnelle Marte in New York, edited by David Gregorio)
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