The economy added only 173,000 net jobs last month but the unemployment rate fell to its lowest level since early 2008, leaving the economic outlook murky as the U.S. Federal Reserve gets ready to consider an interest-rate hike.
The August jobs report from the Labor Department was the last major piece of the economic puzzle to be filled before the central bank meets on Sept. 16 and 17. Stanley Fischer, the Fed’s vice chairman, said earlier this week that that the Fed was awaiting the results of the August survey to help make its judgment on interest rates.
The numbers appear to help both sides of the debate, The New York Times said, with the slowdown in job growth and the absence of any significant wage pressure possibly strengthening the arguments of those who see little risk in keeping monetary policy accommodative.
On the other side, “there were enough positive indicators to keep a September tightening in play, even as Wall Street turns more attention to the possibility of a Fed move in October or at the central bank’s last meeting of the year, in December,” the NYT said.
“The latest jobs data will leave everyone maintaining their position on the Fed,” said Steven Ricchiuto, chief economist at Mizuho Securities USA. “Not the decisive data the street wanted.”
Even with August’s questionable job-growth figure, The Los Angeles Times noted, the economy has added an average of 221,000 jobs over the last three months. The unemployment rate ticked down 0.2 percentage point in August to 5.1%, nearly half what it was at its peak during the Great Recession and nearing the level that economists and the Fed consider close to full employment.
Inflation foes worry that allowing the unemployment rate to fall significantly below 5% runs the risk of leading to an overheated economy.
But the recent turmoil in the markets has fueled anxiety on Wall Street over a rate hike. “If the Fed were just looking at the economic numbers … it would probably raise rates in a couple weeks,” Nariman Behravesh, chief economist at IHS Global Insight, told The Los Angeles Times.
But, he added, “I think the Fed is very worried about the sell-off and the volatility in financial markets.”