US adds 142K jobs in August, with Fed poised to cut rates

The US added 142,000 jobs in August and the unemployment rate ticked down to 4.2 percent, according to data released Friday by the Labor Department, assuaging concerns of a wider economic downturn even as the labor market cools.

The August job gain fell short of economists’ forecasts of 161,000 jobs, although it exceeded the 114,000 jobs added in July and matched unemployment expectations. The report ultimately contained neither a notable downturn nor acceleration that threatened to catch the Fed off-guard as it prepares to reduce interest rates by at least 0.25 percentage points amid concerns the agency is behind the curve on cuts as hiring and job gains slow.

“Slowing, but steady. That’s the message from the August employment report, confirming other recent activity data that shows a mixed picture for the economy,” Manhattan Institute scholar Dan Katz wrote in a commentary. “The unemployment rate moved down modestly to 4.2 percent, suggesting a degree of underlying stability that is at odds with fears of an impending recession.”

After holding interest rates at a 23-year high of 5.25 percent to 5.5 percent since last July, Fed Chair Jerome Powell declared that the “time has come for policy to adjust” during a speech last month at the annual economic policy convening in Jackson Hole, Wyo.

Powell cited weakening labor conditions, saying the “labor market has cooled considerably from its formerly overheated state.”

“The August snapshot is consistent with other data pointing to a weakening job market, including a reduction in job openings pointing to relative balance between the supply and demand of labor,” said Mark Hamrick, senior economic analyst at Bankrate.

“The Federal Reserve will want to reduce its benchmark interest rate to reduce restrictiveness which was the response to historically high inflation. The chief worry among Americans has been high prices, the result of inflation. The state of the job market is now competing for their attention.”

Following devastating job losses at the onset of the pandemic in March and April 2020, the labor market ran white-hot as the economy reopened and employers staffed up, peaking at 939,000 additional jobs in July 2021.

Hiring has slowed considerably from its postpandemic surge, coming into line with prepandemic hiring, even with a massive downward revision last month.

The unemployment rate has also ticked up over the past year from a historic sub-4 percent run to 4.3 percent in July, almost a full percentage point above last year’s low of 3.4 percent, Powell noted in his Jackson Hole address, adding it is “still low by historical standards.”

The September meeting of the Federal Open Market Committee is the last before the 2024 general election on Nov. 5.

The politically independent agency’s handling of rates has become increasingly politicized.

Some Democrats have pushed Powell and the committee to cut rates, citing the impact on housing affordability and the labor market, while former President Trump suggested in February that Powell might cut rates ahead of the election to help Democrats in the upcoming election. Powell, a lifelong Republican appointed by Trump in 2017 and reappointed by Biden in 2021, has made clear the Fed will block out the political noise and base its decision on economic data.

Tobias Burns contributed.

Updated at 9:26 a.m. ET