U.S. August NFP Collapses as Downward Revisions Are Worse, Fueling Fed Cut Bets

TradingKey - Even against already low expectations, U.S. August nonfarm payrolls came in far below forecast, and revised data showed June job growth turned negative, deepening concerns about labor market weakness. The report strengthens the case for a September rate cut and boosts bets on multiple rate cuts through 2025.

According to data released by the U.S. Bureau of Labor Statistics on Friday, September 5:

• August nonfarm payrolls: +22,000, far below the 75,000 forecast and prior 73,000
• Unemployment rate: 4.3%, up from 4.2%, in line with expectations
• Average hourly earnings YoY: +3.7%, matching expectations but down from 3.9% in July

U.S. Nonfarm Payrolls, Source: TradingKey

The agency also revised June and July job numbers downward by a combined 21,000:

• June: Revised from +14,000 to -13,000
• July: Slightly revised up from 73,000 to 79,000

This indicates the labor market was weaker than previously reported in recent months.

The weak jobs data boosted expectations for more aggressive monetary easing by the Fed, sending Treasury yields lower. The 2-year yield dropped over 10 basis points to 3.49%. Traders now price in about 70 basis points of rate cuts by year-end — close to three cuts.

Gold prices rose above $3,580 per ounce, and silver surged past $41 per ounce.

Annex Wealth Management said that a 50-basis-point cut is back on the table. Everyone is now focused on the revisions, not just the headline number. After revisions, job creation was nearly zero.

Renaissance Macro analysts said that the numbers are a comprehensive defeat of the policy hawks and growth bulls. To borrow from Powell, now is the time to unleash the great monetary power of the United States.

Jeff Rosenberg of BlackRock said the Fed is clearly back on the path of rate cuts. As long as the economy doesn’t fall off a cliff, this is a great opportunity for risk assets.

However, it’s important to note that while markets may celebrate a more dovish Fed, history shows that falling yields driven by slowing growth are often negative for equities.