In August, job growth slowed down. However, the unemployment rate dropped to nearly 7-1/2-year low as wages accelerated. This maintained prospects of a Federal Reserve interest rate trudge later this month.
Last month, after an increase of 245,000 in July, Nonfarm payrolls increased 173,000 according to the Labor Department . The gain in August was one of the lowest in five months as the factory sector went through the most job loss since July 2013.
However, the jobs count may have been damaged by false statistical information that often led to severe upward reviews to payroll figures for August.
This implies that hiring has been slowed down and was likely not reflective of the economy’s accurate condition. The unemployment rate fell by two-tenths of a point (down to 5.1 per cent), which was its lowest level since April 2008.
Payroll data were also reviewed for June and July and showed 44,000 more jobs than what was recorded previously. In addition, an average hourly earning increased by 8 cents, which was the largest increase since January. The duration of the average workweek was also extended.
“The payrolls data is certainly good enough to allow for a Fed rate hike in September,” said Alan Ruskin, global head of currency strategy at Deutsche Bank (NYSE:DB) in New York. “The big question is still whether financial market volatility will scupper the plans.”
Most investors agree. US stocks, with the possibility of pressure by higher rates, opened lower, while US government debt yields rose. The dollar value also increased.
The US economy maintains lively despite unstable global financial markets and China’s slowing growth.
Financial markets drastically ascended back bets during a September rate hike over the past month. However, Fed Vice Chairman Stanley Fischer told CNBC last week that it was too hasty to make decisions regarding the stock market direction.
According to economists in a Reuters survey, forecasts increased by 220,000 on nonfarm payrolls last month. They were also warned that the model that was used was flawed.
They stated that the data could be inaccurate because of the low response rate from employers for government payroll surveys in August.
Evidence of a restricting labor market added to a streak of upbeat data, including numbers on automobile sales and housing. This implies that the economy is moving forward after increasing at a healthy 3.7 per cent annual rate in the second quarter.
Decline in unemployment rate took brought more variety that most Fed officials consider more consistent with a low and steady rate of inflation. This would likely boost their anticipation that there will be an increase in wages and lift inflation rates toward their 2 percent target.
A wide range of unemployment stems from people who can’t find full-time jobs, which decreased to 10.3 per cent, which is the lowest since June 2008.
A stricter labor market and evaluations by numerous state and local governments to increase minimum wage ultimately converted into faster earnings growth.
Large retailers such as Walmart (NYSE:WMT), Target (NYSE:TGT) and TJX (NYSE:TJX) have rose pay for workers since the start of the year.