"The latest datapoint bolsters the soft-landing narrative for the US economy," economist says
Kiwibank economists are expecting another rate pause at the Federal Reserve’s September meeting, following a weakening in economic data.
Since March 2022, the Fed has raised its benchmark interest rate by more than five percentage points – a move that has seen the inflation trending back down to its longstanding 2% target. The Fed last hiked its rates in July, pushing its policy rate to the 5.25%-5.5% range – its highest level in 22 years.
In Kiwibank’s First View publication, Jarrod Kerr (pictured above), chief economist, said a big star on the data stage recently was US payrolls, which showed a slowing but still-resilient labour market.
“Employment expanded more than expected with 187K jobs added in the month of August compared with expectations of an additional 170k jobs,” Kerr said. “Though this did follow some significant downward revisions to the previous two months of payroll numbers.
“Hiring remains robust but a strong expansion in the labour force saw the unemployment rate unexpectedly rise to 3.8% (previously 3.5%), the highest it’s been since early last year. In the month alone, 736k people entered or returned to the workforce, and the participation rate climbed back to pre-covid levels (62.8%).”
Another evidence of a cooling market, he said, was the easing in wage inflation. Average hourly pay lifted 0.2% – the smallest gain since early 2021 – pulling the annual rate down a smidge to 4.3%.
“The combination of more people searching for work and cooling wage growth suggests that the labour shortages that once hampered firms continues to improve,” Kerr said. “Overall, the latest datapoint bolsters the soft-landing narrative for the US economy. And the case for another rate pause at the Fed’s September meeting strengthens.”
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