US job growth picked up pace in August but fell short of expectations – Nonfarm Payrolls (NFP)

Today’s NFP report, the most crucial of several US labor sector releases this week, revealed that nonfarm payrolls increased by 142,000 jobs in August, below the expected 164,000 rise and following a downward revision of July’s figure from 114K to 89K.

The report also showed that unemployment dropped to 4.2% in August, down from 4.3% in July. This marks the first decline after four consecutive monthly increases, which had pushed the jobless rate to a three-year high. The unemployment rate was in line with expectations.

In terms of wages, average hourly earnings rose by 0.4% month-on-month, following a downward revision of July’s figure from 0.2% to -0.1%. The annual rate increased to 3.8% in August from 3.6% in the previous month, slightly exceeding the 3.7% forecast.

The solid wage growth signals that consumer spending remains resilient, helping to support the broader economy.

Overall, the data alleviates fears of a sharp weakening in the US labor market, pointing instead to a controlled slowdown. This supports expectations for a less aggressive Federal Reserve decision at the September policy meeting, with current odds at 57% for a 0.25% rate cut and 43% for a 0.5% cut.