August jobs numbers miss expectations

The Scotsman Guide - Victor Whiteman - Sep 2, 2016  11:00 ET

The U.S. economy added 151,000 jobs in August, and the unemployment rate held steady, the Department of Labor reported Friday. It was a solid jobs report but lacked the punch needed to spur the Federal Reserve to hike interest rates in September, analysts say.  

“Despite recent attempts by Fed officials to convince the market that economic conditions are ripe for a rate hike, we believe today’s August jobs report did not pass the high bar needed for a target rate increase this month,” said Doug Duncan, chief economist at Fannie Mae.

Job gains in June and July were revised to 271,000 and 275,000, respectively. The net difference over the two months was 1,000 fewer jobs than initially reported. Between June and August, job gains have averaged 232,000 per month.

Duncan noted that the August report in itself was not weak and had some bright spots. Residential construction hires totaled nearly 11,000, the biggest monthly gain since March.

Fed Chair Janet Yellen said the case for raising the federal funds rate was strengthening during a recent speech in Jackson Hole, Wyoming, but didn’t reveal when that might happen. 

Prior to the release of the August jobs reports, analysts and the futures markets had increased the odds for a rate hike at the Sept. 20-21 meeting, but still were betting on the central bank waiting until after the presidential election. The job additions in August were slightly less than the markets were anticipating, and made it more likely that the Fed will stand pat in September.

U.S. stock markets reacted favorably to the report. The Dow Jones Industrial Average gained nearly 95 points and the Nasdaq was running 30 points higher in early trading.   

“This report is unlikely to change or accelerate the Fed’s intent to raise interest rates,” said Mark Fleming, chief economist at First American Corp.

Other measures of labor strength, such as the number of involuntary part-time workers and the labor participation rate — at 62.8 percent, close to a 40-year low — were unchanged. Average hourly wages ticked up just 3 cents, to $25.73, and the unemployment rate held steady at 4.9 percent.

Professional and health care fields added 49,000 jobs. Social-assistance and the food-services industry gains totaled 22,000 and 34,000 jobs, respectively. Mining shed another 4,000 jobs and is now down by 223,000 jobs since the industry peak in September 2014.  

Danielle Hale, an analyst with the National Association of Realtors, said the labor market still appears headed in the right direction.

“[Some] 2.4 million new jobs have been added since one year ago, which bodes well for home sales in the year ahead,” Hale said. “This report is strong enough to show that the economy continues on track, but not so strong that the labor market shows signs of overheating.”