United States shares edged higher and European shares rallied on Friday after weaker-than-expected U.S. jobs data gave the Federal Reserve more leeway to stand pat on interest rates, while the dollar gained and longer-dated Treasury yields also edged up.
Advertisement
The August payroll gain was slower than the 270,000 job creation in each of the past two months. Fed chair Janet Yellen said in a speech last month that “the case for an increase. has strengthened in recent months”.
“August’s payroll number is weak tea – we need to have stronger job growth for a more sustained period before we can say we’re at full employment”, she said. Traders of interest rate futures see about a one in four chance of a rate hike at the Fed’s September 20-21 meeting.
Traders trimmed the probability of a Fed rate hike this month to 21 percent from the 24-percent chance on Thursday, according to CME Group’s FedWatch program. Fed policymakers will meet again in November and December. Lower rates can encourage more borrowing and spending and thereby stimulate the economy. It’s not all-around strong enough to assure a September interest rate hike. Higher borrowing rates tend to weigh down stock prices. The Dow Jones industrial average was up 85 points in mid-day trading.
If a relatively tepid pace of hiring keeps the Fed on the sidelines, the continuation of ultra-low rates could sustain growth, some analysts suggested.
“This mixed jobs report puts the Fed in a tricky situation”.
Still, modest hiring means it could take longer to fully heal the scars of the Great Recession. In manufacturing, the workweek declined by two-tenths of an hour to 40.6 hours.
The unemployment rate remained 4.9 percent for a third-straight month, the Labor Department said. A broader measure of unemployment that includes discouraged and underemployed workers stands at 9.7 percent.
The steady hiring of the past six years appears to be imbuing Americans with a brighter outlook, a shift from the widespread gloom that long persisted even as the economy grew.
The US Federal Reserve has hinted at a rate rise before the end of this year, with some economists saying ahead of the latest job figures that a move could come at central bank’s meeting later this month. And overall confidence has touched an 11-month high.
Now, the weaker-than-expected August jobs report “has done a disservice to the Fed’s “driving from the back seat” communication strategy”, Komileva said, observing that “outlier” jobs reports this year have provided no useful guide to the “remarkably and persistently resilient” US employment trend. The jobless rate and labor participation rate held steady, while wage gains moderated. “As people become more confident, they will probably spend more”. August figures are often revised higher in subsequent months.
Still, worker pay hasn’t accelerated almost as much as in previous economic recoveries.
Average hourly earnings increased 0.1 per cent last month after a solid 0.3 per cent rise in July.
Advertisement
That figure masks wide variations among industries and occupations. Starting salaries should jump 6.4 percent for data scientists, 6.2 percent for web developers and 5.7 percent for network security engineers, the firm estimates based on surveys of recruiters. “We’re paying above minimums in most markets”.
