US unemployment rate drops to 8.4% as economy extends rebound

US employers added 1.4m jobs in August, sending the unemployment rate down to 8.4 per cent, below the peak of the great recession, as the labour market rebound advanced in the world’s largest economy.

According to data released on Friday by the Bureau of Labor Statistics, businesses continued to rehire a portion of their lost workers last month, albeit at a weaker pace than in July. Employment levels remained well short of their pre-pandemic levels.

The figures roughly matched economists’ expectations for a gain of 1.35m jobs but showed a steeper than forecast drop in the unemployment rate. Leisure and hospitality recovered 174,000 jobs, while retailing added 249,00 positions. The manufacturing sector brought back 29,000 jobs, and government positions rose by 344,000 jobs, buoyed by temporary hiring for the US Census.

In recent months, the US economy has regained about 11m of the 22.5m jobs lost during March and April, but the rebound has been held back by new infection spikes in many states, as well as the fading effects of fiscal stimulus.

The monthly release from the US labour department is the penultimate reading on the labour market before the presidential election in November, adding to its political significance.

Stewardship of the coronavirus-ravaged economy is a key flashpoint between Donald Trump and Joe Biden, his Democratic challenger. Mr Biden was expected to speak about the economy from his home base in Wilmington, Delaware, later on Friday, his campaign said.

US Treasuries sold off following the release of the jobs report, sending yields higher. The yield on the benchmark 10-year note rose 0.03 percentage points to 0.67 per cent. Ultra-long 30-year bond yields also edged higher, climbing over 0.04 percentage points to 1.4 per cent. The reaction was more muted for shorter-dated Treasuries, with two-year yields steady at 0.13 per cent. 

Futures for the S&P 500 point to a slight rise when trading begins.

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