The August non-farm payrolls data was both in line with expectations and somewhat surprising: in line with expectations because the report confirmed the trend shown by the ADP employment data of the previous day, but again below market expectations.

The data showed that the number of non-farm payrolls in the United States increased by 142,000 in August, lower than the market expectation of 161,000. From an industry perspective, the construction industry led the gains, adding 34,000 positions; while the health care and social assistance sectors also increased. However, the US manufacturing industry lost 24,000 jobs that month.

In addition to the number of jobs, the US Bureau of Labor Statistics also released data on the unemployment rate and average hourly wages: the US unemployment rate fell 0.1 percentage point from the previous month to 4.3% in August, the first decline since March. At the same time, US wage growth accelerated-the average hourly wage in August increased by 3.8% year-on-year and about 0.4% month-on-month, both exceeding market expectations and last month's data. The labor participation rate was the same as in July at 62.7%.

It is worth noting that the August report was released along with a substantial revision of July's employment data, from 114,000 to 89,000, while the June data was also revised down by 61,000. In addition, the report also mentioned that the proportion of people who gave up looking for a job or worked part-time rose to 7.9% in August, the highest level since October 2021.

Overall, the non-farm data in August was lower than expected, further proving that the peak of US recruitment in the first half of the year has indeed flattened. However, compared with the signs of uneasiness in July, the changes in the unemployment rate and average hourly wages in August also show that under the pressure of high interest rates, US companies still have considerable resilience, and the market does not need to worry too much.

Matt Rowe, head of cross-asset strategy and portfolio management at Nomura Capital Management, said that the unemployment rate remained at a relatively low 4.2%, which did not show a collapse in the labor market, and hourly wages did not fall, and the situation that many people worried about did not happen. Today's data does not show that a recession is coming, but only shows a slight slowdown in the economy, not a catastrophic event.

The report makes the Fed's next move compelling - before the data was released, the market was almost certain that the Fed would start cutting interest rates at the September 17-18 meeting, and the only uncertainty was the specific extent of the rate cut. With the release of the latest non-farm data, the expectation of a 25 basis point rate cut has become the mainstream view - the probability of the Fed cutting interest rates by 50 basis points this month has now been reduced to 39%.

Seema Shah, chief global strategist at Principal Asset Management, said that the decision facing the Fed is which risk is greater: whether a 50 basis point rate cut will reignite inflationary pressures, or whether a 25 basis point cut will threaten a recession.

John Williams, president of the Federal Reserve Bank of New York, mentioned in his speech that given the progress in reducing inflation and cooling the labor market, he believes that now is the right time to cut interest rates, but refused to clearly provide specific numerical guidance for the rate cut.

Nick Timiraos, a spokesperson for the Federal Reserve, believes that this non-farm payroll report does not provide clear clues because the overall non-farm data is not enough to make a 50 basis point rate cut the basic expectation, but considering the revised data, it is not enough to completely eliminate speculation about a larger rate cut.