US non-farm payrolls increase by 130,000 in August

US non-farm payrolls increased by 130,000 in August, pointing to a slowing economy, according to some - but not all - economists.

Economists had forecast an increase of 165,000.

Combined, payrolls for the previous two months were revised lower by 20,000.

The data saw Treasuries reverse early losses, dragging the yield on the two-year note down from a pre-open high of 1.57% to 1.54%, while that on the benchmark 10-year note was trading one basis point higher to 1.57% but was also off from an earlier high at 1.60%.

Average hourly earnings on the other hand jumped by 0.4%, so that the year-on-year rate of change was steady at 3.2% (consensus: 3.0%).

The length of the average workweek meanwhile ticked higher from 34.3 hours to 34.4, also as expected, while the index of aggregate weekly hours increased at a month-on-month pace of 0.4%.

According to Torsten Slok, chief economist at Deutsche Bank, the latest non-farm payrolls figures were a reflection of a slowing economy.

In remarks to Bloomberg TV, Slok highlighted the increase in the so-called U6 rate of unemployment from 7.0% for July to 7.2% in July, labelling the report overall as "stagflationary".

Looking out to the next Federal Reserve policy meeting, Slok said policymakers were still on track for a 25 basis point cut in the Fed funds rate, not 50 basis points.

The headline unemployment rate however, which is derived from a separate survey than the non-farm payrolls figures, was steady at 3.7% - as expected - even as the labour force participation rate rose by two tenths of a percentage point to 63.2%.

According to the Household survey, from which the unemployment rate is derived, employment jumped by 571,000 persons in August to reach 157.88m, while unemployment declined by 19,000 to 6.04m.

By sectors, and from the Establishment survey, companies in Mining and Logging shed 5,000 jobs and another 11,000 were lost in Retail, with the latter marking the seventh consecutive month of losses.

And in particular, hiring in Education and Health slowed from 71,000 to 32,000, accounting for the lion's share of the undershoot in the payrolls number relative to consensus.

Meanwhile, government hiring picked up from 28,000 in July to 34,000 for August - partly due to hiring for the census - and employment in temporary help services rose to 15,400 after a 7,900 fall during the previous month.

And private sector payrolls grew by only 96,000, following an increase of 131,000 in the month before (consensus: 144,000).

For his part, Ian Shepherdson at Pantheon Macroeconomics said: "Finally, we think it likely now that the trend in the unemployment rate has levelled-off, sooner than we expected. The trend rate of growth of the labor force probably is a bit above 100K, and if payroll growth is set to slow to that pace or less, unemployment can’t keep falling.

"A sustained increase is unlikely anytime soon, and labor will remain scarce, from the perspective of employers, but even a modest increase in the headline rate will increase the pressure on the administration to find a way out of the trade war."

On the other hand, Shepherdson pointed out how much of the slowdown in non-farm payrolls growth had been concentrated on the services side of the economy, with broad-based declines among the various services sub-sectors, not all of which could be blamed on the US-China trade war, so that a partial rebound in September was likely.

"But the trend is softening, as firms scale back hiring plans alongside capital spending, in the face of prolonged and deep uncertainty."

Mickey Levy at Berenberg Capital Markets was more upbeat, telling clients: "Aggregate hours worked jumped and average hourly earnings grew solidly, and the Household Survey showed outsized increases in employment and the labor force participation rate. Households are confident in job-finding prospects and labor market conditions support continued solid consumption growth."