US DATA: Another Tepid Month Of Job Creation Although June Remains The Low
We’re simultaneously writing on the household survey, an area of increased focused with its unemployment rate giving a better gauge of labor market balance amidst a material pullback in labor supply, but the below digs into the payrolls side of the report. The figures should be viewed against recent payrolls breakeven estimates roughly in a range of 50-100k but some seeing scope for lower estimates.
- Nonfarm payrolls growth was softer than expected in August at 22k (sa, cons 75k) along with a two-month downward revision of -21k coming entirely in June.
- The private sector saw a similar story on balance, with a slightly smaller miss with 38k (sa, cons 75k) but a larger downward revision of -36k.
- However, this private sector payrolls growth continues to be dominated by the cyclically incentive health & social assistance category, which despite rising by its least since Jan 2022 still added 47k jobs. Private payrolls ex health & social assistance fell -9k.
- That leaves latest three-month averages of 29k for nonfarm, 29k for private and -30k for private ex health & social assistance. The latter is down from 97k in December.
- The one-month diffusion index for 250 private industries broadly echoes this weak private sector job creation trend, marking a fifth consecutive month sub-50, i.e. with more industries declining on the month than increasing. Admittedly, the 49.6 in August was the highest of these five sub-50 readings, having improved from a particularly low 46.2 in June, but it’s still a subdued trend.
- Coincidentally, that June weakness coincides with a particularly weak overall payrolls reading, with -13k for NFP (in the latest data vintage the first contraction since Dec 2020), -27k for private and -83k for private ex-health & social assistance.
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US TSYS: Early SOFR/Treasury Option Roundup: Projected Rate Cuts Steady
Carry-over SOFR & Treasury call option interest overnight, moderate volumes on a light data session. Underlying futures weaker, curves mildly steeper (2s10s +.996 at 49.364), pre-auction short sets ahead today's $42B 10Y auction. Projected rate cut pricing largely steady vs. late Tuesday (*) levels: Sep'25 at -22.6bp (-22.6bp), Oct'25 at -38.4bp (-38.4bp), Dec'25 at -58.3bp (-57.7bp), Jan'26 at -68.9bp (-68.9bp).
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FED: Minneapolis's Kashkari: Could Cut Rates With Potential To Hold/Hike Later
Minneapolis Fed's Kashkari tells CNBC he's concerned about the trajectory of economic growth and says that his outlook for two rate cuts by year-end is still "reasonable" (he said in June that this implied a "possible first cut in September") though suggests that the Fed could reverse course if it turns out tariffs are too inflationary for comfort. Recall he is not a FOMC voter this year but is in 2026.
- "I would love to not have to do that [backtrack on cuts], but I'm realizing that these tariff effects are going to take a lot longer to really become clear. And if virtually all the other economic data is pointing to a cooling economy and a slowing economy, how long can we wait until the tariff effects become clear? That's just weighing on me right now. And so if the best of all the options is we make some adjustments, and then we have to pause, or even then we have to reverse course. That might be better than just sitting here on hold until we get clarity on tariffs."
- On the labor market: "if you want to look at supply and demand in any market, look at the price. The price of labor is wages, and wage growth is declining. It's been declining for some time. That tells me, yes, the labor market is cooling."
- On the BLS data: "I have had no reason to doubt the integrity of the BLS data...Ultimately, you cannot fake economic reality, even if, in the worst case scenario, imagine that numbers are being faked for anybody's political benefit. People are going to feel what they feel. Companies are either going to be hiring or they're not. And so Americans are going to feel the economy and so convincing them that inflation is not real is not a very effective strategy. Convincing somebody that the jobs number are better than they really are, I don't think it's actually going to work. So I don't even see the point of [manipulating the data]."
- On Gov Kugler's replacement: "There's... 19 of us at the table all making our best case about what's happening in the economy, and you have to persuade your colleagues. And if this person comes in and makes great arguments that we all find very persuasive, they can have a lot of influence."
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