Economics
Jobs report August 2024:
The U.S. economy created slightly fewer jobs than expected in August, reflecting a slowing labor market while also clearing the way for the Federal Reserve to lower interest rates later this month.
Nonfarm payrolls expanded by 142,000 during the month, up from 89,000 in July and below the 161,000 consensus forecast from Dow Jones, according to a report Friday from the Labor Department’s Bureau of Labor Statistics.
At the same time, the unemployment rate ticked down to 4.2%, as expected.
The labor force expanded by 120,000 for the month, helping push the jobless level down by 0.1 percentage point, though the labor force participation rate held at 62.7%. An alternative measure that includes discouraged workers and those holding part-time jobs for economic reasons edged up to 7.9%, its highest reading since October 2021.
The household survey, which is used to calculate the unemployment rate and is often more volatile than the survey of establishments, showed employment growth of 168,000.The balance, though, tilted towards part-time employment, which increased by 527,000, while full-time fell by 438,000.
Markets showed little initial reaction to the data, with stock futures holding negative and Treasury yields also lower.
While the August numbers were close to expectations, the previous two months saw substantial downward revisions. The BLS cut July’s total by 25,000, while June fell to 118,000, a downward revision of 61,000.
“I don’t like this a whole lot. It’s not disaster, but it’s below expectations on the headline, and what really bothers me is the revisions,” said Dan North, senior economist for North America at Allianz Trade. “This is certainly going the wrong way.”
From a sector standpoint, construction led with 34,000 additional jobs. Other substantial gainers included health care, with 31,000, and social assistance, which saw growth of 13,000. Manufacturing lost 24,000 on the month.
On wages, average hourly earnings increased by 0.4% on the month and 3.8% from a year ago, both higher than the respective estimates for 0.3% and 3.7%. Hours worked edged higher to 34.3.
The report comes with markets on edge over the next step for the Fed, which has been on hold with rates since July 2023 after having enacted a series of sharp increases to bring down inflation.
Heading into the release, markets had been pricing in a 100% probability that the Fed will start cutting rates when it meets Sept. 17-18. The only question was how much.
Following the payrolls release, futures market pricing tilted towards a half percentage point cut, according to the CME Group’s FedWatch gauge.
“For the Fed, the decision comes down to deciding which is the bigger risk: reigniting inflation pressures if they cut by 50 [basis points] or threatening recession if they only cut by 25 [basis points],” said Seema Shah, chief global strategist at Principal Asset Management. “On balance, with inflation pressures subdued, there is no reason for the Fed not to err on the side of caution and frontload rate cuts.”
The recent narrative for the economic data has indicated continuing growth but a slowdown for the labor market. Payrolls processing firm ADP reported Thursday that private companies added just 99,000 jobs in August, while outplacement firm Challenger, Gray & Christmas reported that layoffs surged in August and hiring had hit its slowest year-to-date pace going back to at least 2005.
The BLS report indicated that the private sector added 118,000 jobs for the month, up from 74,000 in July. Government jobs increased by 24,000.
Most Fed officials have indicated that they also see rates coming down. In his pivotal annual speech at the Fed’s Jackson Hole, Wyoming conclave, Chair Jerome Powell proclaimed that “the time has come” to adjust policy, though he provided no specifics for what that meant.
In a speech Friday morning, New York Fed President John Williams endorsed rate cuts.
“With the economy now in equipoise and inflation on a path to 2 percent, it is now appropriate to dial down the degree of restrictiveness in the stance of policy by reducing the target range for the federal funds rate,” Williams said in remarks before the Council on Foreign Relations in New York.
This is breaking news. Please check back for updates.
Production at the VW plant in Emden.
Sina Schuldt | Picture Alliance | Getty Images
The struggling German economy has been a major talking point among critics of Chancellor Olaf Scholz’ government during the latest election campaign — but analysts warn a new leadership might not turn these tides.
As voters prepare to head to the polls, it is now all but certain that Germany will soon have a new chancellor. The Christian Democratic Union’s Friedrich Merz is the firm favorite.
Merz has not shied away from blasting Scholz’s economic policies and from linking them to the lackluster state of Europe’s largest economy. He argues that a government under his leadership would give the economy the boost it needs.
Experts speaking to CNBC were less sure.
“There is a high risk that Germany will get a refurbished economic model after the elections, but not a brand new model that makes the competition jealous,” Carsten Brzeski, global head of macro at ING, told CNBC.
The CDU/CSU economic agenda
The CDU, which on a federal level ties up with regional sister party the Christian Social Union, is running on a “typical economic conservative program,” Brzeski said.
It includes income and corporate tax cuts, fewer subsidies and less bureaucracy, changes to social benefits, deregulation, support for innovation, start-ups and artificial intelligence and boosting investment among other policies, according to CDU/CSU campaigners.
“The weak parts of the positions are that the CDU/CSU is not very precise on how it wants to increase investments in infrastructure, digitalization and education. The intention is there, but the details are not,” Brzeski said, noting that the union appears to be aiming to revive Germany’s economic model without fully overhauling it.
“It is still a reform program which pretends that change can happen without pain,” he said.
Geraldine Dany-Knedlik, head of forecasting at research institute DIW Berlin, noted that the CDU is also looking to reach gross domestic product growth of around 2% again through its fiscal and economic program called “Agenda 2030.”
But reaching such levels of economic expansion in Germany “seems unrealistic,” not just temporarily, but also in the long run, she told CNBC.
Germany’s GDP declined in both 2023 and 2024. Recent quarterly growth readings have also been teetering on the verge of a technical recession, which has so far been narrowly avoided. The German economy shrank by 0.2% in the fourth quarter, compared with the previous three-month stretch, according to the latest reading.
Europe’s largest economy faces pressure in key industries like the auto sector, issues with infrastructure like the country’s rail network and a housebuilding crisis.
Dany-Knedlik also flagged the so-called debt brake, a long-standing fiscal rule that is enshrined in Germany’s constitution, which limits the size of the structural budget deficit and how much debt the government can take on.
Whether or not the clause should be overhauled has been a big part of the fiscal debate ahead of the election. While the CDU ideally does not want to change the debt brake, Merz has said that he may be open to some reform.
“To increase growth prospects substantially without increasing debt also seems rather unlikely,” DIW’s Dany-Knedlik said, adding that, if public investments were to rise within the limits of the debt brake, significant tax increases would be unavoidable.
“Taking into account that a 2 Percent growth target is to be reached within a 4 year legislation period, the Agenda 2030 in combination with conservatives attitude towards the debt break to me reads more of a wish list than a straight forward economic growth program,” she said.
Franziska Palmas, senior Europe economist at Capital Economics, sees some benefits to the plans of the CDU-CSU union, saying they would likely “be positive” for the economy, but warning that the resulting boost would be small.
“Tax cuts would support consumer spending and private investment, but weak sentiment means consumers may save a significant share of their additional after-tax income and firms may be reluctant to invest,” she told CNBC.
Palmas nevertheless pointed out that not everyone would come away a winner from the new policies. Income tax cuts would benefit middle- and higher-income households more than those with a lower income, who would also be affected by potential reductions of social benefits.
Coalition talks ahead
Following the Sunday election, the CDU/CSU will almost certainly be left to find a coalition partner to form a majority government, with the Social Democratic Party or the Green party emerging as the likeliest candidates.
The parties will need to broker a coalition agreement outlining their joint goals, including on the economy — which could prove to be a difficult undertaking, Capital Economics’ Palmas said.
“The CDU and the SPD and Greens have significantly different economic policy positions,” she said, pointing to discrepancies over taxes and regulation. While the CDU/CSU want to reduce both items, the SPD and Greens seek to raise taxes and oppose deregulation in at least some areas, Palmas explained.
The group is nevertheless likely to hold the power in any potential negotiations as it will likely have their choice between partnering with the SPD or Greens.
“Accordingly, we suspect that the coalition agreement will include most of the CDU’s main economic proposals,” she said.
Donald Trump sacks America’s top military brass
Walmart sell-off bizarre, buy stock despite tariff risks: Bill Simon
China carries big risks for investors, money manager suggests
New 2023 K-1 instructions stir the CAMT pot for partnerships and corporations
The Essential Practice of Bank and Credit Card Statement Reconciliation
Are American progressives making themselves sad?
-
Economics1 week agoDonald Trump wants states and cities to do as they are told
-
Economics1 week agoDefense stocks drop after Trump says Pentagon spending could be halved
-
Economics1 week agoCut debt or face economic heart attack
-
Technology7 days agoReddit CEO Steve Huffman Unveils Monetization Strategy for 2025
-
Economics1 week agoPPI January 2025:
-
Leaders7 days agoAdebayo Ogunlesi – From Nigerian Roots to Global Financial Leadership
-
Economics1 week agoMexico, Canada tariffs could add $6,000 to the cost of a car, by one estimate
-
Blog Post1 week agoPower of Ratio Analysis in Business Performance Assessment