Overall, the August jobs report was not strong enough for the Fed to hike at the next meeting in September, especially not after the very weak ISM report released yesterday, with the index falling below 50, indicating a contraction in the U.S. manufacturing sector.
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The slowdown in job growth reduces the likelihood that the Federal Reserve will raise interest rates when it meets later this month.
June and July employment reports were extremely positive, and wage growth seemed to be picking up.
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.
The figures might have been held back by temporary factors, such as layoffs by automakers while plants are being retooled for new models. The figure has been hovering near the lowest levels in nearly 40 years, partly because the Baby-Boom generation is retiring, but also because some younger workers have given up on finding a job. Today’s report “may give marginally more ammunition to those guys who want to be more cautious”, he said.
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.
“We expect the labor market to reach full employment by early 2017 and to surpass it thereafter”, said Elad Pashtan, an economist at Goldman Sachs in NY.
He explained that the longer the Fed waits, the more there is risk that the economy will be strong enough for inflation rates to go above the 2% target projected by the Fed, hurting the organization’s credibility for not raising interest rates on time. Higher borrowing rates tend to weigh down stock prices. Between June and August, job gains have averaged 232,000 per month.
The number of long-term unemployed (those jobless for 27 weeks or more) was essentially unchanged in August and accounted for 26.1% of the unemployed.
Temporary-help jobs, a harbinger of future hiring, fell 3,100.
In a Reuters poll, economists had a consensus forecast of payrolls escalating 180,000 in the month prior and the unemployment rate sliding one-tenth of a percentage point to 4.8%.
US employers slowed their hiring in August and barely raised wages. Manufacturing employers cut their workweek to 40.6 hours and the average workweek for production employees also decreased to 33.6 hours. The closely-watched U6 rate, or “underemployment” rate, which measures unemployed workers and those working part time for economic reasons, remained stuck at 9.7%. That is down from a peak of 17.4 percent in 2009, just after the recession ended.
The Dow Jones industrial average rose 50.78 points, or 0.28 percent, to 18,470.08, the S&P 500 gained 6.43 points, or 0.3 percent, to 2,177.29 and the Nasdaq Composite added 12.85 points, or 0.25 percent, to 5,240.06. Low response rates in a popular vacation month and difficulty adjusting for seasonal effects at the start of the school year could be to blame.
Federal Reserve Chair Janet Yellen and other Fed officials highlighted the economy’s improvement at a conference last month.
Environment has been challenging for banks of Wall Street due to long stretched low interest rate policy since the financial crisis.
Wages: Accelerating wage gains on top of a good pace of jobs growth should provide support for further increases in consumer spending in the final quarter of the year. Reynolds American added $1.04, or 2.1 percent, to $50.79 and Altria Group picked up 69 cents, or 1 percent, to $67.01. Fair enough, especially after yesterday’s news that manufacturing activity contracted in August.
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Americans are willing to make big purchases, such as homes and cars, but sales of both may have plateaued.
