US adds jobs, but at a slower clip

Deutsche Welle
4 Min Read

US job creation rose less than expected in August as the unemployment rate dropped to a 7-year low and wages slightly increased. The figures keep analysts guessing about the timing of a US interest rate hike.
The unemployment rate in the United States came in at 5.1 percent in August, falling to a seven-and-a-half-year low as the world’s largest economy added another 173,000 nonfarm jobs, new figures released by the US Labor Department on Friday showed.

The increase in nonfarm payrolls was lower than expected by analysts – who had forecast a rise of 220,000 jobs. It also came after the Labor Department revised its July figures upward from 205,000 to 245,000 new jobs.

The August data represents the smallest monthly gain in US employment in five months, although it may have been caused by statistical flukes. Figures often do not adequately account for the start of the new school year and are usually muddied by low response rates from employers.

In recent years, payroll figures for August were frequently revised up sharply after initial weak readings.

US labor market robust

Nevertheless, the August jobs data showed that the US economy remains vibrant. Job gains were spread across nearly all sectors, suggesting the world’s largest economy enjoys strengthening momentum in the third quarter after growing a robust 3.7 percent between April and June.

Ralf Umlauf, an analyst with the regional German bank HELABA, told the news agency Reuters that the drop in the US jobless rate was “more significant than expected,” and that there was “upward pressure on wages.”

In August, US workers’ hourly earnings, indeed, rose 2.2 percent compared with the same month a year ago. Experts say the tightening labor market and decisions by several state and local governments to raise the minimum wage should also translate into faster earnings growth.

To raise or not to raise

Analysts, however, are split in their opinions about whether or not the US August jobs data will strengthen the case for an interest rate increase at next week’s meeting of the US Federal Reserve. The US central bank has repeatedly stressed that a jobless rate below 6 percent and inflation close to 2 percent would remain key to the first increase in US interest rates since 2006.

Yet, while the labor market is improving, the US inflation rate remains stubbornly below 1 percent after oil prices collapsed last summer.

Moreover, a recent global equities sell-off caused by worries about China’s growth, forced analysts to scale back their bets on a rate hike as early as September.

Marco Bargel, chief economist with Germany’s Postbank, believes the recent data point to a “tight decision” by the Fed, with the “falcons” within the bank now certainly pressing for a September hike

“There’s a strong desire within the Fed to depart from its zero-interest policy. But developments in China could still thwart the effort,” he told Reuters.

uhe/cjc (Reuters, dpa, AFP)

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