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© Reuters. By Kim Khan
Investing.com – The US economy has created fewer jobs than expected last month, as wage inflation has risen, leaving markets with mixed signals as to what this would mean for the Federal Reserve.
increased by 130,000 in August, the Department of Labor announced Friday. The market was expecting an increase of 160,000 payroll, according to forecasts by economists established by Investing.com.
The unemployment rate remained stable at 3.7%, suggesting that the economy remains close to full employment.
Average hourly earnings increased 0.4% in the month and 3.2% over the same period of the previous year. It was a little stronger than expected of a monthly increase of 0.3% and 3.1% from one year to the next.
In the past, such a report would leave the Fed with contradictory indications of monetary policy.
Job growth was weaker than consensus. And "more than 20% of jobs created (were) due to temporary hiring for the 2020 census, with a downward revision from the previous two months," tweeted Diane Swonk, Grant Thornton's chief economist.
June payroll gains were revised downward by 15,000 from 193,000 to 178,000, and from 164,000 to 159,000 in July, down from 20,000 to 159,000.
In addition, the average monthly employment growth for the first eight months of 2019 is 158,000, compared with 233,000 in 2018 and 225,000 the year before, tweeted Patrick Chovanec, chief strategist at Silvercrest Asset Management.
This weakness could favor a certain relaxation of rates.
However, with wage growth beating expectations, inflation hawks would likely be more inclined to tighten up.
But these times are not normal, as far as the Fed is concerned.
And if anyone needed a reminder, President Donald Trump had tweeted before the release of the figures, again demanding rate cuts and criticizing Fed Chairman Jerome Powell. (This happened a day after Trump tweeted about the "excellent" numbers of ADP jobs (NASDAQ 🙂 and could have let those who watched that the total number below expectations.)
The Fed "was way too early to get up, and much too late to cut," he tweeted, adding, "Where did I find this guy, Jerome?"
The markets seem pretty confident that nothing has really changed from yesterday and that Trump will have his place at the FOMC meeting later this month.
The Fed's Futures Contracts predict a quarter-point reduction probability of 92%, a bit lower than when the jobs report was released, according to Investing.com.
It was flat at the beginning of the session.
And the yield slightly increased by 0.005 percentage point to 1.570%
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