(CercleFinance.com) – Economists greeted with a certain skepticism on Friday the contrasting American employment figures published during the day, which according to them do not allow to settle the debate between the prospect of a rate cut of 25 or 50 basis points by the Fed in a little less than two weeks.
According to the Labor Department, the U.S. economy created only 142,000 nonfarm payrolls in August, a figure far below market expectations, which had generally been around 165,000.
The unemployment rate, however, fell by 0.1 points to 4.2% last month, where economists had expected it to remain stable at 4.3%.
On Wall Street, the American stock markets were moving in a scattered order on Friday morning despite the publication of this monthly report on American employment, which was considered rather disappointing.
“As much of this bad news has already been priced into the markets over the course of the week, the expected market decline through to the close could be contained,” said Florian Ielpo, head of macroeconomic research at Lombard Odier Investment Managers.
These figures, however, reinforce expectations of a marked slowdown in the economy in the third quarter, already fuelled by the mixed statistics revealed in recent weeks.
“The labour market clearly remains a cause for concern,” write Commerzbank economists.
Although the jobs market has lost some of its dynamism, its state of health does not seem sufficiently worrying to seriously consider a hard landing for American growth, or even a possible fall back into recession.
Another reason likely to reassure stakeholders is that these data could also encourage the Federal Reserve to accelerate its rate cuts, even if their extent remains unknown.
“This employment report, which is generally bad, makes a 50 basis point rate cut by the Fed in September a little more credible,” nevertheless believes Bastien Drut, head of strategy and economic studies at CPR AM.
‘At the Jackson Hole conference, Jerome Powell had affirmed that the Fed ‘would do everything it can to support the labor market,” the analyst recalls.
“With this employment report confirming a further deterioration, a 50-point rate cut from the Fed is clearly on the table,” he concludes.
Other specialists, for their part, believe that the employment report does not allow us to say whether the Fed will opt for an easing of 25 or 50 basis points on Wednesday, September 18.
“As with many recent data relating to the employment market, confusion persists,” says Florian Ielpo, economist at Lombard Odier.
“These data do not necessarily encourage the Fed to cut rates by 50 basis points in September,” he continues.
“The sense of urgency is not yet there and a lot can already be done with a ‘dovish’ statement in September,” the analyst believes.
According to the CME Group’s FedWatch barometer, traders are still overwhelmingly leaning towards a 25 basis point rate cut, with an estimated probability of 61%, while the likelihood of a 50 point reduction is estimated at 39%.
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