Federal Reserve Shifts Focus to Jobs Amid US Labor Market Weakness

The Federal Reserve's attention has shifted towards jobs following recent labor market weakness in the US. According to ABN AMRO's Chief Economist Nick Kounis, Nonfarm Payrolls fell by 23K in July, while household employment data softened. The unemployment rate declined as labor force participation dropped to multi-decade lows, signaling cyclical weakness.

Kounis notes that this could re-balance Federal Reserve concerns toward employment, but ABN AMRO still expects the Fed to stay on hold due to inflation risks skewing towards a hike. Weak jobs data challenge the Fed's stance, particularly in light of recent revisions to previous months' employment numbers.

The 3-month average gain in employment was just +20K, which could indicate that some of the strength in payrolls in the last few months was due to transitory factors.