22,000! US August Nonfarm Payrolls Far Below Expectations; Will the Fed Take "Drastic Measures"?

Data shows that after seasonal adjustment, US nonfarm payrolls increased by only 22,000 in August, far below market expectations of 70,000. By sector, private sector employment increased by only 38,000, while government employment decreased by 16,000. Among these, education and healthcare remained the largest contributors, adding 46,000 jobs, while manufacturing employment decreased by 12,000.

Although the new employment data was weak, some indicators remained robust. The labor force participation rate edged up to 62.3%, with the prime-age (25-54) participation rate rising to 83.7%, near a historical high. Average hourly wages increased by 0.3% month-on-month and 3.74% year-on-year, both in line with market expectations.

Against the backdrop of the statistical bureau's credibility being affected by political turmoil, the latest report has drawn even more market attention. In early August, just hours after the release of the US July employment report, President Trump suddenly announced the dismissal of US Bureau of Labor Statistics Commissioner Erika McEntarfer, accusing her of manipulating employment data for political purposes. Subsequently, Trump announced the nomination of E. J. Antoni, chief economist of the right-wing think tank Heritage Foundation in Washington, as the new commissioner.

Following the data release, Bank of America Global Research revised its forecast, now expecting the Fed to cut rates by 25 basis points in September and December this year, whereas previously it had expected no rate cuts for the year. "The August jobs report is likely to heighten the Fed's concerns about labor market weakness. There is now clearer evidence that labor demand is deteriorating, not just supply," analysts further wrote. "If the labor market weakens significantly further, the Fed could also cut rates in October."

Kim Forrest, Chief Investment Officer at Bokeh Capital Partners, said: "The latest data gives the Fed enough room to cut rates. There are some worrying signs: insufficient job growth, overall data missing expectations, and a rise in U6 underemployment. The Fed may choose to cut rates by 50 basis points this month and continue to take action in subsequent meetings to support the economy."

Last month, Fed Chair Powell warned that as hiring slows, a rebound in the unusually low layoff rate could lead to a rapid rise in unemployment. The latest data shows that more than a quarter of the unemployed have been looking for work for over 27 weeks. Analysts believe this exacerbates concerns about labor market deterioration and adds pressure to the Fed's decision-making.