The jobs report answered one key question — but left us guessing on another

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Throughout the week, we’ve seen a variety of charts that show a deteriorating labor market.

Wednesday’s JOLTS data showed July’s job openings fell to the lowest level since January 2021.

Thursday’s ADP data showed the lowest monthly growth of private jobs, also since 2021.

The story that these charts tell is clear: The labor market is cooling — and enough to cause some anxiety in the markets.

The definitive update came Friday morning with the much-anticipated August jobs report, the gold standard for measuring the labor market. And it was anything but definitive.

As our Chart of the Week shows, it only answered one of the two key questions markets have been asking.

The first is whether the labor market, which was coming in for a landing a little too hot in July, is crashing. It’s not. After July’s Sahm rule-triggering unemployment rate of 4.3%, August’s data shows the plane coming out of its turbulent mini-dive and flattening back out with a 4.2% print.

To keep with the standard aviation metaphor, economist reactions note that hope for a soft landing is very much still alive.

But as Indeed Hiring Lab’s economic research director Nick Bunker wrote in a note Friday morning, “The current pace is approaching stall speeds.” The two previous prints, from June and July, had hiring numbers revised down. And despite beating July, August’s data did not beat expectations for more robust growth of 165,000 jobs.

While those revisions and negatives may add more anxiety to a market that thinks the Fed is uncomfortably tardy with its rate cuts, economists continued to point to the directionality in their commentary. Some noted that while the labor market hasn’t improved much, it also isn’t tracking to stumble so much as to make a 50 basis point rate cut — the larger of the two options — a shoo-in at the September Fed meeting.

For a jobs report that was supposed to answer this question, this may be unsatisfying. But the months we’ve waited for details about the next rate cut have already become years.

And with the confirmation that the plane is not about to crush its landing gear just yet, investors can wait a little bit longer. As Julie Hyman wrote earlier this week, if a 50 basis point rate cut is tantamount to the Fed saying, “OK, the economy is starting to make us nervous,” it’s not even clear if that would be welcome — no matter how much the economy craves lower rates.

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