Slowed US job growth casts doubts on Fed hike

Slowed US job growth casts doubts on Fed hike

Slowed US job growth casts doubts on Fed hike It seems that hopes for a hawkish turn from the Fed have been dashed for the moment, based on a report from Reuters.

On Friday, the Labor Department announced an additional 151,000 jobs in nonfarm payrolls in in August, compared to an upwardly revised 275,000 increase in July. Manufacturing and construction sectors were also reported to have suffered declines in hiring last month. The unemployment rate remained at 4.9% with more people entering the labor market.

Economists surveyed by Reuters had predicted growth of 180,000 for last month, along with a slightly lower 4.8% unemployment rate.

Though lower than anticipated, last month’s jobs gains may be enough to motivate the Fed to raise interest rates in December. The increase in payrolls, after all, still reinforces readings of regained vitality in the US economy after nearly stalling in the first half of the year.

Overnight interest rates have been held steady since being raised for the first time in nearly a decade at the end of last year. Prior to the announcement, Fed Chair Janet Yellen had remarked that the case for raising rates had grown stronger in recent months. The next US central bank policy meeting is set to happen on Sept. 20-21.

The August slowdown in job growth is understandable given that the labor market is near full employment and the economy’s recovery from the 2007-2009 recession is showing signs of waning. August payrolls estimates for the past several years have also tended to be overly pessimistic, subsequently being revised upward following initial announcements.

Other figures from the report that showed deceleration include wage growth, which hit 0.1% in August, compared to 0.3% in July; working hours, with the average workweek in August slipping to 34.3 hours from July’s 34.4 hours; and labor force participation rate, which went unchanged at 62.8%.

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