Hiring slows in August, lowers expectations for Fed rate hike
A hiring slowdown in August following two hot months for job growth dimmed expectations for the Federal Reserve to increase interest rates when officials meet in three weeks.
The nation's employers added 151,000 jobs in August, following two consecutive months of hiring gains that averaged 273,000 workers added to payrolls, the Labor Department reported Friday.
The report, described by analyst Nariman Behravesh as “mediocre,” didn't offer any reasons to be alarmed about the health of the economy. But it removed any sense of urgency for the Fed to take immediate action to prevent the economy from overheating, economists said.
“I think it just buys them a little more time,” said Anthony Chan, an economist at Chase. “Solid, but it did not cross the threshold to justify an immediate Fed rate hike.”
New York Fed President William Dudley said several weeks ago that a rate hike would be possible at the Fed's meeting on Sept. 20-21, leading some analysts to wonder whether there could be two rate increases this year. Economists said there's little chance of that happening now.
The unlikely prospect of a September rate hike appeared to please financial markets. The Dow Jones industrial average index increased 72.66 points, or 0.39 percent, to close at 18,491.96. The S&P 500 index rose 9.12, or 0.42 percent, to 2,179.98.
August is typically a slower month for hiring, but the report's number was still well below consensus expectations of 180,000. Also, wages ticked up by just 0.1 percent, compared with 0.3 percent in July. The unemployment rate stayed at 4.9 percent for the third consecutive month.
Another month of strong wage growth and hiring that exceeded 250,000 would have shown that June and July were not anomalies and bolstered the case for the Fed to raise interest rates, economists said.
The job figures in August could reflect a more accurate picture of the pace of hiring for the rest of the year, said Behravesh, chief economist at IHS Markit in Massachusetts.
“We're reaching a plateau in terms of jobs creation,” Behravesh said. “It's not necessarily a bad thing. It's just the reality of our economy.”
So far, there aren't many signs of waning confidence among consumers, who account for two-thirds of the economy. The labor force swelled by 176,000 in August, an indication that job seekers are optimistic about their chances of finding work. The Conference Board this week said its consumer confidence index increased to its highest point since September 2015.
Confidence might wane if Americans start bringing home less in their paychecks or hiring growth continues to weaken. But there's nothing to suggest either of those scenarios is imminent, said Gus Faucher, an economist at PNC Financial Services Group.
“I think we have an economy that's OK. It's not great, but I see no reason why we cannot continue at this pace well into 2017,” Faucher said. “This is certainly enough to keep consumer spending going forward.”
A broader gauge of unemployment, which includes discouraged workers and people in part-time jobs who would rather be working full-time, stayed at 9.7 percent. That is down from 10.3 percent a year ago.
Hiring growth fell off across most major industries, while goods-producing sectors lost jobs. Manufacturers, construction companies and energy firms cut workers. And job gains dropped off significantly in professional and business services, which includes engineers, accountants and architects as well as temporary jobs.
Chris Fleisher is a Tribune-Review staff writer. Reach him at 412-320-7854 or firstname.lastname@example.org.