"New Federal Reserve News Agency": The non-farm payroll report almost confirms a rate cut in September, but the debate over subsequent rate cuts is more complex

On Friday, after the release of the U.S. non-farm employment data for August, the well-known financial journalist Nick Timiraos, known as the "New Federal Reserve Correspondent," wrote that employment growth sharply slowed this summer, and the August employment report clearly indicates that job growth has significantly cooled since the beginning of the year. It is almost certain that the Federal Reserve will lower interest rates by a quarter of a percentage point at its meeting in two weeks, but this also complicates the subsequent debate about the pace of rate cuts.

Timiraos pointed out that Federal Reserve Chairman Jerome Powell had previously stated that if the data showed a slowdown in the labor market, the Fed would lower interest rates as planned:

Powell said last month, "The balance of risks seems to be shifting." The current situation reflects that "both labor supply and demand are significantly slowing." This means that the risk of worse-than-expected outcomes in the labor market is rising.

Timiraos noted that the Fed was only recently willing to cut rates because inflation had previously stopped declining. The White House's policies of restricting immigration, cutting federal government staff, and significantly raising tariffs have raised concerns about weakening demand and exacerbated price pressures.

Timiraos believes that Powell's remarks last month marked his first substantial push to reach a consensus among his colleagues—previously, there had been divisions within the Fed over whether to focus more on the risks of rising inflation or the risks of worsening employment.

"New Federal Reserve Correspondent" Analyzes Non-Farm Report

Regarding the latest August non-farm report, Timiraos summarized in a post on the X platform:

In August, U.S. employers added 22,000 jobs, with the private sector adding 38,000 jobs, and the unemployment rate rose to 4.3%, the highest level since 2021.

The job growth data for June was revised down, showing a decrease of 13,000 jobs; the job growth data for July was revised up from 73,000 to 79,000. Compared to previous reports, the revised net decrease in jobs this time was 21,000.

In the three months ending in August, the private sector added an average of 29,000 jobs per month, the lowest increase since the outbreak of the pandemic. The average number of jobs added in the private sector over the past six months has slowed to 67,000.

Timiraos pointed out that June saw negative job growth, ending the current streak of 53 consecutive months of monthly non-farm job growth, which is the second-longest record on record, but far below the 113-month record that ended during the COVID-19 outbreak in 2020.

The number of permanent job losses slightly increased in August, but this ratio has remained stable this year, slightly above 1.1% of the labor force.

The comprehensive weekly wage index is a good monthly indicator of nominal income growth and is highly correlated with nominal GDP (NGDP) growth. The index rose by 4.4% year-on-year in August, marking a new low for this cycle. The three-month annualized growth rate was revised down from 3.2% in July (previously 4.6%) to 2.4%.

On an unrounded basis, the unemployment rate in August rose from 4.248% in July to 4.324%. Federal Reserve officials expect the unemployment rate to rise to 4.5% in the fourth quarter.