At 173,000, August’s job gains are below market expectations and make a September rate hike by the Fed less certain

The first Friday of the month at 8:30 EDT is widely anticipated by market participants as the Labor Department presents a fresh gauge of the most recent economic performance in its release of the labor report for the prior month.  Today’s number was even more closely watched since it will be the most up to date information on the labor market that the Federal Reserve has prior to its upcoming September meetings where it will assess the state of the economy and determine whether or not it should raise its benchmark interest rate which has been near zero since the depths of the recession in late 2008. 

For August, a 173,000 job gain was reported, below market expectations (217,000), but the prior two months were upwardly revised by a combined 44,000 jobs.  The unemployment rate slipped back to 5.1%, the lowest level since April 2008 and near, if not at, the level considered to be “full employment”.   The wider measure of unemployment, the U-6 measure, fell to 10.3%.  Wage growth remained relatively benign in this data release, with average hourly earnings rising at a 2.2% pace from year-earlier levels. Anecdotal evidence from seniors housing operators suggest wage pressures are mounting, however.

The report suggests that the economy continues to strengthen.  However, the data are not emphatically strong and makes a move by the Fed on September 16th and 17th less than certain.  The wide swings in the stock market in recent weeks, as well as weakening expectations on global economic growth adds to the uncertainty and gives the Fed plenty of things to think about before they pull the trigger and start to normalize monetary policy.

Source: Bureau of Labor Statistics, NY Times