U.S. Employment Trends: A Steady Cooldown

U.S. employment saw a smaller-than-expected increase in August, with nonfarm payrolls rising by 142,000 jobs. The unemployment rate, however, fell to 4.2%, suggesting a modest slowdown in the labor market. Wage growth remains strong, but the Federal Reserve may still opt for a 25 basis point rate cut.

U.S. employment increased less than expected in August, but a drop in the jobless rate to 4.2% suggested an orderly labor market slowdown continued and probably did not warrant a big interest rate cut from the Federal Reserve this month.

The below-expectations rise in nonfarm payrolls reported by the Labor Department on Friday likely reflected a seasonal quirk that tends to push the initial August print lower. Nonetheless, labor market momentum is slowing, with the closely watched employment report also showing the economy added 86,000 fewer jobs in June and July than previously reported.

The start of the new school year, however, varies across the country, which can throw off the so-called seasonal factors. The initial August payrolls counts have been revised higher in 10 of the last 13 years. Layoffs remain at historic low levels.

(With inputs from agencies.)