The Aug US employment report was slightly disappointing but did not point to a dire outlook to the US labor market, UOB Group Senior Economist Alvin Liew notes.

Jobless rate improves and wage growth reaccelerates

“Job creation was below expectations at 142,000, but more damaging was the sharp downward revision to Jun/Jul numbers. Unemployment rate eased to 4.2% as unemployed numbers fell by -48,000 while participation rate stayed steady at 62.7%. Wage growth reaccelerated above forecast to 0.4% m/m, 3.8% y/y in Aug, inflation worries not yet over.”

“Job creation in the first 8 months was clearly on a moderating trend (compared to the prior three years), which also continued to feature a narrowing base of job creation among the sectors in Jul with manufacturing, retail trade and information services sectors losing jobs.”

“The headline job number while slightly disappointing, did not justify calls for a bigger rate cut, in our view, especially if we consider the improvement in unemployment rate and the pickup in wage growth. We keep to our forecast of a 25 bps Fed rate cut in Sep, but we acknowledge the balance of risk has skewed towards more and deeper cuts.”