Fed Shifts Focus to Jobs as US Labour Market Weakness Persists

Recent data on the US labour market has raised concerns about cyclical weakness, according to ABN AMRO's Chief Economist Nick Kounis. Nonfarm Payrolls fell by 23K in July, and household employment data softened, with downward revisions to previous months.

The unemployment rate declined, but this was largely due to a drop in labour force participation, which hit multi-decade lows. This trend is often seen as an indicator of cyclical labour market weakness rather than structural changes.

Kounis argues that the data could shift Federal Reserve concerns towards employment, re-balancing their dual mandate. However, ABN AMRO still expects the Fed to stay on hold over the next few months due to high inflation risks.