August non-farm payrolls rose just 22k, well below the 75k consensus; three-month average is now 29k. The unemployment rate rose to 4.3%, breaking above its range of the last 15 months/ Payrolls also softened between the July and September 2024 FOMC meetings, resulting in a 50bps cut, Standard Chartered's economists John Davies and Steve Englander report.

From ‘solid’ to soft in less than six weeks

"The US labour-market report for August was softer than expected. Headline non-farm payrolls rose just 22k, versus the 75k consensus. Average weekly hours and y/y hourly earnings were also below consensus, and the unemployment rate rose to 4.3%, breaking above its range of the last 15 months to a level last seen during the post-COVID recovery in 2021. While Fed Chair Powell was still describing the labour market as “solid” as recently as the 30 July FOMC, his stance had clearly changed by his Jackson Hole speech on 22 August. We think the August labour-market data has opened the door to a ‘catch-up’ 50bps rate cut at the September FOMC meeting, just as it did this time last year (we previously expected a 25bps cut)."

"Fed rate-cut pricing, now at 28-29bps for September, has yet to shift firmly in that direction. We recognise that we are moving early, but we expect preliminary revisions to employment data for April 2024 to March 2025 (due next week) to support our 50bps call. We maintain our view that headline payrolls and unemployment data underplay the degree of labour-market softening given distortions from the birth-death adjustment and the more clear-cut decline in the employment-population ratio. We still doubt that the growth and inflation backdrop will allow for further easing beyond September, but after an initial 50bps cut, it could take time for the market to price in a slower subsequent pace of cuts."