Nonfarm Payrolls Causes Major Market Drop

The US stock markets are down sharply following the release of the US Nonfarm Payrolls report. The numbers came out slightly higher than expected.

Analysts anticipated 140,000 new jobs to be added for August, but the final numbers released on Friday were 142,000 jobs added. There were fears that the stock market would react badly to the positive jobs report, as this is an increase from last month’s 89,000 jobs added.

The Dow Jones index dropped by 0.88% after the news broke. The S&P 500 fell by 1.62%, and the Nasdaq Composite dropped by 2.37%. These are some of the sharpest declines we have seen in weeks, and certainly the most substantial drops for September so far.

The earlier expectation was that 160,000 new jobs would be added, but that was then adjusted right before the report was released. The drastically reduced figures are a blow for those analysts who made economic predictions, but they are still well above last month’s numbers. They show that the US economy is recovering, but not quite as quickly as anticipated.

The report showed more than just the number of new jobs added. It also included data on unemployment, and there was a decrease to 4.2% there. Wage inflation as also reported, and that was up to 3.8%, an increase of 0.2%. That number was calculated by looking at Average Hourly Earnings changes.

Stock Market Impact

Because the payroll data came in under expectations, that is going to impact the stock market moving forward. An already difficult month will turn into one that could see extreme lows from the stock market.

We may also see a deeper than anticipated rate cut from the Federal Reserve later this month. The Federal Reserve will be cutting interest rates soon, and that can directly impact the US stock market.

If the rate cut is high, then the stock market could  react poorly, with sharp decline that stretches through the fall months.