In a resilient move, the S&P 500 (SPX) opened Friday’s trading session in the green, shrugging off yet another concerning labor market update.
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The U.S. unemployment rate reached 4.3% in August, rising from 4.2% in July. While the reading was in line with the estimate, unemployment is now at its highest level since October 2021. In addition, the U.S. added just 22,000 nonfarm payrolls in August, well below the consensus estimate of 75,000. July and June’s nonfarm payrolls were revised lower by a combined 21,000 jobs, with June indicating a loss of 13,000, snapping a 53-month streak of monthly gains.
Weak Jobs Data Elevates Rate Cut Odds
The labor market has issued several concerning signals in recent weeks. For the week ended August 30, initial jobless claims jumped by 8,000 to 237,000, ahead of the estimate of 230,000. Furthermore, the Bureau of Labor Statistics revised May and June’s nonfarm payrolls lower by a combined 258,000 jobs last month.
The data has virtually guaranteed a rate cut at the September 16-17 Federal Open Market Committee (FOMC) meeting, according to CME’s FedWatch tool. The odds of a 25 bps reduction stand at 84%, while a 50 bps cut is now on the table with a 16% chance.
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