Stock markets have surged after a slowdown in U.S. employment growth dampened the prospect of a September interest rate hike by the Federal Reserve.
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The problem with this interpretation is the chance of the Fed raising interest rates this month is not as out of the question as it seems.
After revisions, August is actually in the middle of the pack in terms of monthly job gains. Residential construction hires totaled almost 11,000, the biggest monthly gain since March.
The U.S. added 151,000 jobs in August, according to the Labor Department’s report on non-farm payrolls, fewer than the 180,000 new jobs that economists were expecting. An analysis by Tara Sinclair, chief economist at job site Indeed.com and a professor at George Washington University, found that the Fed has only hiked rates in the two months before a presidential election once in the past 70 years.
Over the past 12 months, monthly jobs gains have averaged 204,000, according to the department.
As Canally points out, though, August doesn’t exactly have a sterling track record for job creation. Democratic candidate Hillary Clinton has pushed for increasing the minimum wage and spending on infrastructure to create more jobs. Recruiting firm Robert Half estimates that pay will grow much faster next year for in-demand technology professionals.
But the 34,000 new jobs in “food services and drinking places” is the real puzzle, especially because this segment of the economy hasn’t been doing very well. And it wasn’t just the back-to-school shopping season.
On top of that restaurants added 34,000 workers, another sign that consumers are willing to spend.
Manufacturers coping with a weak global economy and the oil slump cut 14,000 jobs. Wall Street has to wait till September 21 for a decision pending from the August jobs report. Retail sector employment increased by 15,100 jobs and payrolls in the leisure and hospitality sector rose 29,000.
That’s turned the corner in August. Leisure and hospitality added 29,000 jobs. We’ll do the math: There are just over 118 million households in the U.S. So, at a minimum, there are at least 20 million people without jobs in the U.S. That compares with Bureau of Labor Statistics data showing only 7.8 million people unemployed – or 4.9% of the workforce. Utility companies made the biggest gains, while energy companies rose as the price of oil rose for the first time this week. The pace of job growth and the stagnant unemployment rate were slightly more disappointing than analysts had anticipated, though they were not weak enough to indicate that the recovery has been derailed. That is slightly less than the guesstimate it made in August of a year ago.
Other recent economic data has been mixed, though most analysts forecast a pickup in growth after a sluggish start to the year. As long as markets are stable and companies’ balance sheets are healthy, we will remain positive on corporate fixed-income securities. Several senior Fed colleagues signalled the August employment report would be a key determinant in deciding whether to tighten or sit pat.
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Yellen has room to be more bold, Komileva said, in part because the Fed chief used her speech in Jackson Hole, Wyo., last week to suggest that while the Fed was moving closer to a near-term rate rise, the ultimate “terminal rate” would likely be lower than it would have been in the past. But they probably aren’t moping around either.
