Last week Janet Yellen, the chairwoman of the Federal Reserve, said the country’s economic growth and a stronger jobs market meant “the case for an increase in the federal funds rate has strengthened in recent months”.
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Mr Gor said the headline employment number continued “to show weakness in the U.S. labour market”, and coupled with weak productivity, it was “clear that the U.S. economy is struggling here”.
Nonfarm payrolls added 151,000 jobs in August which was a decline from July’s 275,000 jobs. The unemployment rate remained steady at 4.9 percent.
The Federal Reserve could increase rates as soon as next month, in September, but will likely do so ONLY if employment numbers, which will be reported at the beginning of September, come in as strong as they were in the last few months. Mortgage rates remain at historically low levels, however.
Yet the August job figures may lead the Fed to hold off at its next meeting, September 20-21, and await further economic data.
Treasury two-year note yields, the coupon securities most sensitive to Fed policy, rose one basis point, or 0.01 percentage point, to 0.79%, according to Bloomberg Bond Trader data. The central bank is charged with fostering maximum employment and stable prices, and in December, it raised its benchmark interest rate amid signs that the economy was picking up steam.
As the US Federal Reserve has failed to follow up December 2015’s interest rate hike – the first in nearly a decade – with further increases in 2016, the Reserve Bank of Australia has lowered the cash rate to 1.50 per cent with two interest rate cuts.
There is no question that Bank of America will profit from an increase in the federal funds rate.
The S&P 500 posted 38 new 52-week highs and 2 new lows; the Nasdaq Composite recorded 127 new highs and 15 new lows. Fed and other economists have said about 100,000 to 125,000 new jobs a month are needed to keep pace with the population and labor force growth, and hold the unemployment rate steady. Reuters speculates that Augusts’ jobs gains, however, could still be enough to motivate the Fed to raise interest rates this coming December. The proportion of Americans who are either working or looking for work has been flat for about two years near a 40-year low.
Both measures fell short of market expectations and followed comments a week ago by the chair of the USA central bank that the case for raising rates had strengthened in recent months. That is down from a peak of 17.4 per cent in 2009, just after the recession ended.
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. And overall confidence has touched an 11-month high.
Before the release of the jobs report, the metal was little changed as it headed for a second straight weekly decline. For the year, wages are rising at a pace that is perhaps a full 1.5 percent faster than anticipated inflation.
“It’s the best news from an attitude standpoint that we’ve seen in our workforce since the recession began”, said Carl Van Horn, director of the Heldrich Center for Workforce Development at Rutgers.
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“We still have more work to do to ensure that more people get to share in the prosperity they help to create”. 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.
