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Slower hiring in August signals Fed rate hike less likely

After two consecutive months of hearty jobs gains, hiring eased in August, with the government reporting Friday that employers expanded their payrolls by 151,000 workers.

The official unemployment rate, based on a separate survey of households, remained at 4.9 percent. Average hourly earnings grew slightly, bringing the 12-month increase in wages to 2.4 percent — a modest gain that keeps most workers ahead of inflation.

The temperate performance and the absence of any wage pressure are expected to bolster the position of those within the Federal Reserve who favor a wait-and-see approach toward raising the benchmark interest rate when the central bank meets this month.

This report reflects only a single month of the labor market's performance, but it aroused particular attention because it offers the last major piece of economic news before the central bank's gathering on Sept. 20 and 21.

"This morning's report is good, but probably not good enough" to persuade the Fed to raise interest rates in September, said Carl R. Tannenbaum, chief economist at Northern Trust. "It confirms that the economy is performing well but does not provide the threat of overheating that might have caused an interest rate increase sooner rather than later."

Since the financial crisis, Fed policymakers have raised the interest rate range just once, in December, from its near-zero level. Low rates are intended to encourage businesses to borrow and invest, but Fed policymakers are now split between those who worry that reducing the economic stimulus by lifting rates would damage growth and jobs and those who fear that waiting could allow inflation to take hold.

The jobless rate has been halved in the past seven years, and consumer spending remains strong, but wages, adjusted for inflation, have only recently begun a steady climb. A broader measure of unemployment that includes discouraged and underemployed workers stands at 9.7 percent.

Earlier this year, monthly job gains flip-flopped, plummeting to 24,000 in May and swelling to more than 10 times that number in June and July. Revised estimates from the Labor Department left totals from the previous two reports little changed and brought the three-month average job gains to 232,000. The August estimate is subject to two more revisions.

Economists say it is natural for the jobs machine to slow as the unemployment rate shrinks.

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