Despite the soft report, Richmond Federal Reserve Bank President Jeffrey Lacker on Friday said the USA economy appears strong enough to warrant significantly higher interest rates. He placed a 55 percent probability on the Fed raising its rate at its next meeting compared with just a 30 percent probability in the prior poll. 2, 2016, the US government issues the August jobs report. Lacker also said the August payrolls data suggests the job market is still tightening. “But it’s solid enough to engender a heated policy discussion, especially given the unintended consequences and collateral damage of a prolonged period of ultra low interest rates”.
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A more plausible explanation is that the strong job market momentum of the past two years is slowing. As a result, Fed policymakers may want to await further economic data before acting to make borrowing more expensive.
A rate hike at the September Federal Open Market Committee meeting was seen as a possibility.
The Fed last raised borrowing costs in December 2015, the first such move in nearly a decade, bringing the interest rate range to 0.25%-0.5%.
The prospect of an interest rate rise in the U.S. has receded after news that the world’s largest economy suffered a lull in job creation last month.
In light of the report, he said that Federal Reserve officials shouldn’t feel pressure to raise rates. The Dow Jones industrial average closed up about 73 points.
Still, modest hiring means it could take longer to fully heal the scars of the recession.
Separately, the Labor Department also said that average hourly wages, which have climbed 2.4 percent over the past 12 months, inched up a weaker-than-expected 0.1 percent, or $0.03, in August to $25.73. But as long as data in the next few months suggests continued moderate economic growth and a rise in inflation toward the Fed’s 2-percent target, Fed policymakers look likely to back a December rate hike as a prudent step toward normalizing what has been almost a decade of ultra-easy monetary policy.
While the August jobs report will be closely scrutinized, it may be less reliable than other monthly jobs figures.
After two months of blockbuster job gains, US companies delivered mixed news as hiring slowed in August. After falling during most of the expansion, the unemployment rate has been little changed this year.
Lacker, who is not a voting member of the USA central bank’s rate-setting committee this year, said he still favors raising rates sooner than later and that the Fed’s last policy meeting in July would have been a “good time” to tighten policy. Fed Chairman Janet Yellen said in a speech last month that “the case for an increase. has strengthened in recent months”. And overall confidence has touched an 11-month high.
Consumers are more confident and have been spending at a steady clip.
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A Gallup survey released last month reported that the percentage of Americans who say their employers are hiring has reached the highest level since Gallup began asking the question in 2008.
