"New Fed News Agency": The nonfarm payroll report almost guarantees a rate cut in September, but the debate over further cuts is more complicated.

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On Friday, after the release of the US August non-farm employment data, Nick Timiraos, the well-known financial journalist known as the “new Fed mouthpiece,” wrote that employment growth slowed sharply over the summer. The August jobs report makes it clear that since the start of the year, job growth has noticeably cooled. This has all but cemented that the Federal Reserve will cut rates by a quarter percentage point at its meeting in two weeks, but it also complicates the debate on the pace of further rate cuts.

Timiraos pointed out that Fed Chair Powell has previously stated that if data show the labor market is slowing, the Fed will proceed with planned rate cuts:

Last month, Powell said “the balance of risks appears to be shifting.” The current situation reflects that “both labor supply and demand are cooling substantially.” This means the risk that labor market outcomes turn out worse than expected is rising.

Timiraos said that since inflation had previously stopped declining, the Fed was only recently willing to cut rates. White House policies restricting immigration, cutting federal government staffing, and sharply raising tariffs have both raised concerns about weaker demand and intensified price pressures.

Timiraos believes Powell’s speech last month marked the first time he has substantively pushed for consensus among his colleagues—prior to this, there were internal Fed divisions over whether to focus more on upside inflation risks or on job market deterioration risks.

“New Fed Mouthpiece” Analyzes Non-Farm Report

Summarizing the latest August non-farm report, Timiraos posted on the X platform:

In August, US employers added 22,000 jobs, the private sector added 38,000 jobs, and the unemployment rate rose to 4.3%, the highest since 2021.

June’s job growth figure was revised down, now showing a decrease of 13,000 jobs; July’s number was revised up, from the previous 73,000 to 79,000. Compared to previous reports, these revisions show a net decrease of 21,000 jobs.

In the three months through August, the private sector added an average of 29,000 jobs per month, the slowest increase since the pandemic outbreak. The six-month private sector average slowed to 67,000.

Timiraos pointed out that June saw negative job growth, ending the current 53-month streak of monthly non-farm job gains—the second-longest on record, but well below the 113-month streak that ended with the 2020 COVID outbreak.

In August, the number of people permanently unemployed rose slightly, but the proportion has remained basically stable this year, slightly above 1.1% of the labor force.

The comprehensive weekly earnings index is a good monthly indicator of nominal income growth and is highly correlated with nominal GDP (NGDP) growth. In August, the index rose 4.4% year-on-year, marking a new low for the current cycle. The three-month annualized growth rate fell to 2.4% from July’s downward-revised 3.2% (previously 4.6%).

Calculated without rounding, the August unemployment rate rose from July’s 4.248% to 4.324%. Fed officials expect the unemployment rate to rise to 4.5% in the fourth quarter.

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