Fed at a potential pivot point on job market

Job growth over the last three months has hit one of the weakest patches, outside the pandemic, since the US economy was limping to recover from the 2007 to 2009 financial crisis and recession.

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Yet the unemployment rate is the same as it was a year ago at 4.2%, around US Federal Reserve estimates of full employment. Wage growth of roughly 4% annually is enough to keep workers ahead of inflation but not so much it raises inflation concerns.

Fed officials weighing a possible rate cut at their September meeting will have to decide which set of competing facts send the strongest signal about the future of the US job market, with a potentially pivotal report on Friday showing whether weak job growth continued fora fourth month in August, or rebounded in asign that the labor market remains healthy.

Ifrecent months offer a clue, the answer may remain in the eye of the beholder among policymakers split between those who feel the job market could be at the brink of breaking, and those who see the current situation as harder to read given continued wage growth and a dip in the supply of workers that may make slower monthly job growth the new normal.

Job gains have averaged just 35,000 over the last three months, a figure that may have raised alarm about rising unemployment in prior years, but is closer to a “breakeven” level that is estimated to have fallen well under 100,000 due to deportations and tighter immigration.