Finance and Economics APP learned that on September 6, the US Bureau of Labor Statistics (BLS) released: In August 2024, the non-farm employment increased by 0.142 million, compared to the previous value of 0.114 million; the unemployment rate fell to 4.2%, from 4.3% previously. China Merchants Securities released a research report stating that the various details of the August US non-farm data are mixed, overall pointing to a continued cooling of the labor market, but with the marginal slowdown in speed, not reinforcing the need for a 50 basis point rate cut in September. The US bond yield curve has finally ended its inversion, and US stocks continue to be under pressure amid cooling expectations in fundamentals.

1) In August, non-farm added 0.142 million people, lower than the market's expected 0.165 million. Although the initial value of non-farm additions in August rebounded from the initial value in July, the data for the previous month was significantly revised downward. Non-farm additions for July were revised down from the initial value of 0.114 million to 0.089 million, and for June, they were revised down again from 0.179 million to 0.118 million, a total downward revision of 0.086 million.

2) Looking at different industries, manufacturing showed a significant cooling, with a decline of -0.024 million (compared to 0.006 million previously), consistent with the situation reflected in the US ISM Manufacturing New Orders Index, which fell to 44.6% in August (from 47.4%). The main drivers are still education and medical services, with healthcare and social assistance adding 0.044 million (previously 0.059 million). The government sector added 0.024 million (previously 0.015 million), with non-cyclical education, medical, and government sectors combined accounting for nearly half of the overall non-farm additions. Temporary support services saw a narrower decline of -0.0029 million (previously -0.018 million), business services turned positive, recording 0.008 million (previously -0.013 million). Leisure and hotel industry rebounded by 0.046 million (previously 0.024 million), and there were no obvious signs of cooling in service sector consumption.

3) Hourly wage growth rates and average weekly working hours rebounded. Hourly wage growth rate increased to 0.4% (from 0.2% previously), with a year-on-year rebound to 3.8% (from 3.6%). Private sector average weekly working hours in August rebounded to 34.3 hours (from 34.2 hours), reflecting reports from the Fed's Beige Book released on the 5th that some regions reported companies cutting hours and shifts, as an early sign of cooling employment levels. Subsequent observation is still needed to see if there is a rapid weakening in private sector average weekly working hours.

4) The unemployment rate in August fell to 4.2% (from 4.3% previously), while the labor force participation rate remained flat at 62.7% (from 62.7% previously). Among the 25-54 age group, the labor force participation rate slightly adjusted to 83.9% (from 84.0% previously), with the youth group showing a weak labor force participation rate. However, the labor force participation rate for the 55 and older group increased to 38.6% (from 38.3% previously). Considering the decline in the unemployment rate and the rebound in private sector average weekly working hours, the cooling rate in the labor market has marginally slowed down, reducing the urgency for a 50 basis point rate cut by the Fed in September.

After the data release, New York Fed President Williams stated that the time for a rate cut has come, and the Fed has made progress towards its dual goals of price stability and full employment, with risks now balanced. The US bond yield curve has ended its inversion, with the 2-year and 10-year Treasury yields both falling to around 3.704%. CME data shows the probability of a 50 basis point rate cut in September is around 43%, but a 25 basis point cut still remains the most likely scenario.

Due to factors such as weak US PMI data released this week, rapid decline in job vacancy rate to 4.6% (previous value 4.8%), and the Fed Beige Book reflecting stagnant or declining economic activity in more regions (increasing from five in the previous period to nine), overseas markets once again expect a weakening of the US economic fundamentals. The details of the August non-farm data overall indicate a marginal slowdown in the labor market and does not boost the necessity of a 50 basis point rate cut in September, leading to a correction in the three major US stock indexes.

Risk warning:

The Fed's policy is better than expected.