Haitong Point Review of August 2025 US Non-Farm Data: Weak Non-Farm Solidifies Rate Cut Expectations

Guotai Haitong released a research report stating that the non-farm payroll data for August in the United States fell significantly short of expectations, and the U.S. job market is showing weak supply and demand. Although there hasn't been large-scale layoffs or significant reduction in employment duration by companies, it is becoming increasingly difficult for unemployed workers to find work quickly due to the fragile "tight balance" state. The institution believes that the U.S. job market may still maintain a tight balance for some time. The weak job data in August may pave the way for a rate cut in September, but there is still high uncertainty whether consecutive rate cuts can be initiated after September. Key points from Guotai Haitong are as follows: August non-farm payroll: significantly weaker than expected. The number of new non-farm jobs in the United States in August was only 22,000, significantly below market expectations. In addition, the total number of non-farm jobs added in June and July was revised down by 21,000. In June, the data was further revised down by 27,000 to -13,000, marking the first negative change in non-farm job additions since December 2020. The July data was revised up by 6,000 to 79,000. U.S. job market: fragile tight balance. The "balance" is reflected in the fact that with the rise in labor force participation rate, the increase in unemployment rate has not significantly exceeded market expectations; and the forward-looking average weekly working hours index remains stable. The fragility is reflected in the fact that the proportion of long-term unemployed people is further rising, and the distribution of new jobs in the private sector is concentrated. In summary, the current U.S. job market shows weak supply and demand, with companies not yet resorting to large-scale layoffs or significant reduction in employment duration, but it is becoming increasingly hard for unemployed workers to find work quickly. Will the tight balance be broken in the future? Historically, initial non-farm job additions in August have mostly been weak, and they usually see upward revisions in the following months. Moreover, the initial data for unemployment claims in the U.S. has not significantly deteriorated yet, and with the Fed supporting the economy with subsequent rate cuts, the U.S. job market may still maintain a tight balance for some time. Federal Reserve: high probability of a 25BP rate cut in September. The weak job data in August may pave the way for a rate cut in September. Even if the August inflation data exceeds expectations to a certain extent, it may be interpreted as a one-time impact from tariffs and temporarily overlooked, making it difficult to significantly hinder the rate cut in September. However, there is still high uncertainty whether consecutive rate cuts can be initiated after September, and future employment and inflation data need to be monitored. Risk warnings: Escalation of political pressure from Trump further jeopardizing the Fed's independence; Non-linear deterioration of U.S. unemployment rate.