US NFP: More evidence of slowing growth – Nordea

Kjetil Olsen, analyst at Nordea Markets, points out that the US Nonfarm payrolls increased by a lower than expected 130k in August following a revised 159k in July (down from 164k).

Key Quotes

“The 6-month average increased, however, from 140k to 150k, since the very weak February reading went out of the calculation. The 12-month average decreased from 185k to 173k.”

“Private payrolls were up only 96k, well below consensus of 150k. It could indicate that the economy is really starting to slow. At face value today’s figure of private employment is consistent with growth below trend. A disclaimer is that August is known of being underreported initially, and then revised up later, however.”

“Nevertheless, the trend employment growth has slowed during 2019 indicating slowing in the overall economy also. Weakness is more than evident in manufacturing; the question is still how much the rest of the economy will be affected.”

“The U3 unemployment rate was stable at 3.7 % while the broader U6 unemployment rate increased 0.2 % point to 7.2%.”

“The only strong element of today’s job report was wage growth which picked up to 0.4% m/m (3.2% y/y). This is the second month in a row wage growth surprise to the upside.”

“Overall the labour market report confirms that growth in the US economy is slowing. We are expecting a new rate cut of 25bp at the September meeting. Both the 2-year and the 10-year treasury yield were down 4bp half an hour after the publication of the report.”