NEW YORK: Weak US employment figures have strengthened expectations for a Federal Reserve interest rate cut this month despite triggering stock market declines over economic worries.
Wall Street’s three main indices initially opened higher after official data revealed the US economy added just 22,000 jobs in August, significantly below July’s 79,000 figure.
Analysts had anticipated the numbers would confirm a cooling labour market as companies reduce hiring amid ongoing uncertainty surrounding President Donald Trump’s tariff policies.
Markets had already largely priced in a quarter percentage point rate reduction ahead of the Fed’s upcoming monetary policy meeting later this month.
The actual job creation numbers fell substantially short of the 77,000 positions economists had forecasted.
All three major US indices ultimately closed lower with the S&P 500 declining 0.3%.
“An initially positive reaction to today’s weak payrolls report has given way to some classic ‘buy the rumor, sell the fact’ action,” said Chris Beauchamp, chief market analyst at investing and trading platform IG.
Oxford Economics revised its Fed rate cut projection forward to September after previously anticipating a December reduction.
“We don’t know how much longer this slowing of hiring is going to last,” said Art Hogan of B. Riley Wealth Management.
The employment data also pushed the dollar and US Treasury yields lower while gold reached a new record high.
Gold has benefited as a safe haven for investors moving away from long-term bonds recently affected by debt sustainability concerns.
Previously gloomy economic data had supported equities as investors interpreted it as increasing the likelihood of Fed rate cuts, which typically benefit businesses.
However, “as concerns about the economy grow, we could see stocks struggle,” warned Kathleen Brooks, research director at trading group XTB.
European stocks also finished the day lower across major indices.
Tokyo markets climbed after President Trump signed an order reducing Japanese auto tariffs to 15% from 27.5%.
Oil prices extended losses amid expectations of excess supply as OPEC+ nations including Saudi Arabia and Russia are anticipated to further unwind production cuts this weekend.
Crude oil has dropped more than 12% this year as non-OPEC+ producers increase output while tariffs constrain demand.
Tesla shares gained 3.6% after the electric vehicle maker’s board proposed a compensation package for CEO Elon Musk that could exceed $1 trillion if specific performance targets are achieved. – AFP