The Economy

U.S. Job Growth Falls to 151,000 in August

The latest jobs report increases the odds the Federal Reserve will defer any interest rate hike until no sooner than December.
Matthew HellerSeptember 6, 2016

U.S. employment growth cooled off in August after two straight months of strong gains, dimming the prospects that the Federal Reserve will raise interest rates this month.

The Labor Department said hiring rose by 151,000 jobs last month, sharply down from an upwardly revised 275,000 increase in July and a 271,000 gain in June. The unemployment rate was unchanged at 4.9%, roughly half of what it was seven years ago, and wage gains were modest.

Over the past several years, the government’s initial August hiring estimates have been weak only to be subsequently revised higher. But The Wall Street Journal said last month’s report “reinforced market expectations that the Federal Reserve will push off a rate increase until December at the earliest.”

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“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,” Carl R. Tannenbaum, chief economist at Northern Trust, told The New York Times.

Central bank officials meet Sept. 20-21 to discuss raising rates for the first time since December. According to Fed Chair Janet Yellen, the economy needs to create just under 100,000 jobs a month to keep up with population growth, and employers have added jobs at a monthly pace of 182,000 so far this year.

Payrolls are growing at “double the rate needed to keep pace with growth in the working-age population,” Federal Reserve Bank of Richmond President Jeffrey Lacker said Friday. “Unless employment growth slows significantly in the months ahead, it will continue to push our benchmark interest rates up.”

Financial markets on Friday were pricing in a roughly 21% chance of a rate hike this month and a 54.2% probability in December, according to CME Fedwatch. “The labor market remains strong enough to support a rate hike in December,” John Silvia, chief economist at Wells Fargo Securities in Charlotte, N.C., told Reuters.

Average hourly earnings for private-sector workers rose 0.1% last month and 2.4% from a year earlier in August — a slowdown from July’s 2.7% annual gain, which was the best in seven years.