Wall Street’s focus on Friday was squarely on the August U.S. jobs report, which came in mixed and sparked a debate among market participants over the size of the expected Federal Reserve interest rate cut later this month.

The U.S. Bureau of Labor Statistics said nonfarm payrolls rose by 142K in August. Economists were expecting an increase of 160K. Meanwhile, the payroll numbers for July were revised down to +89K from +114K, and those for June were revised down to +118K from +179K.

Additionally, the unemployment rate ticked down to 4.2% in August from 4.3% in July, as expected.

U.S. stocks (SP500) slid after the data, while Treasury yields fell as bonds were snapped up. Here are some exchange-traded funds that track the benchmark index: (SPY), (VOO), (IVV), (RSP), (SSO), (UPRO), (SH), (SDS), and (SPXU).

See below for various reactions to the nonfarm payrolls report and commentary on rate cuts:

Nick Timiraos, the Wall Street Journal‘s Fed watcher:

“There was a chance the jobs report would provide an obvious signal on the size of the first cut, and futures-market pricing would move to 90% right away for either 25 or for 50.

Instead, this report doesn’t neatly resolve the tactical question, and the pricing is at 50-50.

The headline figures weren’t bad enough to make 50 the base case but, in light of the revisions, it wasn’t good enough to convincingly and cleanly douse speculation on a larger cut.”

Jason Furman, former deputy director of the U.S. National Economic Council:

“Overall the jobs report is reassuring. A healthy 142K jobs added, average weekly hours increased, participation stayed the same, and most importantly the unemployment rate fell back to 4.2%.

Pace of job growth (adjusting for benchmark revision) mostly unchanged over last year.

Based on this it seems completely clear to me that the Federal Reserve should cut rates at its September meeting. It also seems completely clear to me that it should start with a 25bp point cut while continuing to make clear more are coming.”

Parker Ross, global chief economist at Arch Capital Group:

“Goldilocks? It’s not exactly a ‘good’ jobs report, but it’s not as ugly as July, and that’s all it needed to be to greatly decrease the odds of a 50bps cut in a couple weeks.

Unemployment ticked down. Earnings ticked up and job growth rebounded modestly.

However, there were meaningful negative revisions to the prior two months of job growth (-86k) and the trend in unemployment remains clear with the Sahm rule climbing further above its recession threshold.”

Ernie Tedeschi, director of economics at The Budget Lab at Yale:

“August payrolls come in at 142,000. That’s on its face better than July. 2M revisions however were -86K. Last month we thought the 3M moving average was 170K. This month it is 116K. That is meaningfully slower and not just a single month of idiosyncrasy.

Before the pandemic, a three-month pace of 116K would have struck many economists as the ideal ‘sweet spot’ breakeven pace of jobs growth. But the true breakeven pace could be higher now, as evidenced by the recent rise in the unemployment rate.

The good news in this report is that in July, the unemployment rate ticked back down to 4.2%. The burst of temporary furloughs we saw in July rolled off. There weren’t meaningful changes either way in the other margins of unemployment.”

Francois Trahan, founder of The Macro Institute and Trahan Macro Research:

“The August employment report came and went. It was less dramatic than last month, but the trends have not changed much (see negative revisions to June/July). There are several real-time proxies of the unemployment rate, but one of my favorites is from the Conference Board.

It is sometimes referred to as the ‘Labor Market Differential’ but it is just the spread between the Jobs Are Easy To Get survey and Jobs Hard To Get survey. This series hit a fresh cycle low last month highlighting that labor markets are still easing.

This is backed up by similar data from the Quits Rate. There are plenty of employment related series ahead, but we will have to wait a month for the September data.”

Peter Berezin, chief global strategist and director of research at BCA Research:

“The idea that payrolls actually grew by 142K in August is a stretch given ongoing negative revisions. In June, payroll growth was originally reported as 206K. Two months later, it’s down to 118K. It could easily end up below 100K.”

Renaissance Macro Research:

“While the unemployment rate fell as temp layoffs reversed, the number of workers working part-time for economic reasons jumped sharply for the second consecutive month. As a result, we continue to see upward pressure in underemployment: the U6 rate rose to a fresh high of 7.9%.

If you listen to most Fed speakers, you lean to 25 (basis points), but if you think about Powell’s (Jackson Hole) speech, he went a bit beyond most of his colleagues. I don’t buy the whole build a consensus story. If Powell wants to lay the case out for 50, he will find enough people to go along with him.”

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