For now, investors see only a 27 percent chance that the Fed will hike during its September 20-21 meeting, according to the futures markets.
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“We expect no rate hike this month, but things will be different by December”, said Ian Shepherdson chief economist, at Pantheon Macroeconomics.
The report will come more than two weeks before the USA central bank’s September 20-21 policy meeting.
With the labor market near full employment, a slowdown in job growth is normal.
As a result, analysts said, Federal Reserve policymakers may want to await further economic data before acting to raise interest rates to make borrowing more expensive.
Citi – The probability for a rate hike in both September and December is now lower since subcomponents of the jobs report disappointed.
The much-awaited USA employment data revealed to be weaker than expected, with slowed jobs growth in August after two straight months of strong gains and wage gains moderated.
After two months of blockbuster gains, US employers slowed their hiring in August to a modest increase of 151,000, reducing the likelihood that the Federal Reserve will raise interest rates when it meets this month. However, the odds for a December rate increase edged up to 54.2 percent from 53.6 percent the previous day.
“The August employment report will be an important input into the FOMC decision at the September 20-21 meeting”, Goldman Sachs’ Elad Pashtan said. Average hourly earnings for August rose by 0.1%, slightly below the 0.2%, expectation, but year-on-year earnings were pushed down from growth of 2.7% to 2.4%.
The Dow Jones Industrial Average added 111.49 points, or 0.6 percent, to 18,530.79.
“Equity markets are going to give the Fed at least one rate increase but if they start to perceive a series of hikes coming, and coming sooner than later, that is when equity markets will get a little nervous here”. The greenback added 0.3% to $1.1163 per euro, and advanced 0.7% to 103.93 yen. Still, growth has been restrained by soft business investment and declining exports amid weak global trade and a strong dollar.
Economists had forecast payrolls rising by 180,000 last month and the unemployment rate slipping one-tenth of a percentage point to 4.8 per cent. Others, including Evercore ISI’s Krishna Guha, suggested this month’s figures, which are traditionally weak and tend to be revised higher, will follow the same path of Augusts past, which has seen an average revision of 62,000 over the last five years.
The gains came after Markit’s latest Purchasing Managers’ Index (PMI) for the construction sector remained below the 50 threshold that signifies expansion for the third consecutive month, but rebounded from July’s seven-year low of 45.9 to 49.2 last month.
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The participation rate remains near multi-decade lows, in part reflecting demographic changes, and economists say this partially explains why wage growth has been sluggish.
