Job gains moderated but stayed steady in August, and the unemployment rate fell to a 7-1/2-year low, adding to evidence that may convince the Federal Reserve to raise interest rates this month.
“With this jobs report… the Fed finds itself in a real uncertainty jam when it comes to a September interest rate hike“, Mohamed El-Erian, chief economic adviser at Allianz, in Newport Beach, California, said in an email.
With this sample of Wall Street commentary, I hope I’veillustrated how futile it is for individual investors to expend any energy worrying about the timing of the Fed’s interest rate rise.
This morning saw the release of the most anticipated economic data of the year (and arguably of the past several years), as the Labor Department published its employment situation report for August at 8:30 a.m. EDT.
Hiring in August was the weakest in five months, but the government revised up the June and July figures by a combined 44,000 jobs.
Their share of job creation almost doubled from 27.1 percent in July, reflecting not just the start of the school year but also weaknesses in other sectors of the economy where foreign customers and capital matter more.
The Fed cut the short-term rate it controls to a record low of nearly zero in December 2008 to try to stimulate growth during the Great Recession.
Investors appeared disappointed by the report, perhaps because it could encourage Fed officials to lift rates. Lacker said he won’t make a final decision on whether to vote for a rate increase until he hears the discussion with his colleagues at this month’s gathering on September 16-17.
Yet other factors have clouded those predictions lately. At the same time, stock market turbulence, a persistently low inflation rate and a sharp slowdown in China have complicated the decision. Although the USA economy has been good, this report is not a resounding victory for the American economy. The unemployment level has fallen to a level which most economists and policy makers alike, will consider as full employment.
Thomson ReutersMohamed A. El-ErianAccording to Fed policymakers gathered in Jackson Hole, Wyoming last week, not only would the August jobs report need to be decent but market gyrations would need to dissipate for them to act, despite sustained strength in both the labor market and the broader economy.
Also, consumer spending has been healthy and has been powering job growth at retailers, restaurants and hotels.
“We’re seeing growth. We’re seeing opportunity”.
“It’s interesting and disappointing that today’s data didn’t provide us with that ‘Ah-ha!’ clarity that everyone is seeking”, said Michael Arone, Chief Investment Strategist at State Street Global Advisors.
But manufacturing firms have been stumbling amid the global headwinds. The sluggish wage growth suggests that employers still see many unemployed workers and don’t have to offer higher pay to attract qualified applicants. And the proportion of Americans working or looking for work is stuck at a 38-year low.
“A bumper payrolls number would have sealed the case for higher interest rates in many people’s minds”, he said, “while a low number would have dealt a blow to any chances of tightening of policy at the next meeting”.