Underwhelming Jobs Numbers Make September Interest Rate Hike Questionable

iStock/Thinkstock(NEW YORK) — Friday’s announcement that the U.S. economy added a lower-than-expected 151,000 jobs during the month of August has cast some doubt on the likelihood that the Federal Reserve will raise its key interest rate later this month, according to three economists interviewed by ABC News.

The addition of 275,000 jobs in July and 271,000 in June had given impetus to calls for the Fed to raise rates at its meeting in late September.

Michael Gapen, chief U.S. economist with Barclay’s, told ABC News that he’s standing by his September hike call, but admitted “the optics of this report are less than we would have liked.”

As the economy recovers and reaches “full employment” (generally considered below 5 percent, when everyone who wants a job has one, and the unemployment rate largely represents people moving between jobs), many at the Fed have expected hiring to slow down a bit, Gapen said.

“Those who make this point say 150K per month is sufficient to suggest labor markets will continue to improve and support the inflation outlook,” he said in a email.

Others believe it’s far more likely that an interest rate hike will come in December.

“We have cut our odds of a September rate hike from 30 percent to 20 percent but raising December [odds] from 55 percent to 60 percent,” Director of Real Time Economics at Moody’s Analytics Ryan Sweet told ABC News. “We believe there is an 80 percent probability of at least one rate hike this year.”

In light of the report, he said that Federal Reserve officials shouldn’t feel pressure to raise rates.

“Some Fed officials were worried the economy was set to blow past full employment, which would be problematic because returning the economy to full employment without triggering a recession would be difficult,” he explained.

And while he thinks that the August numbers are likely to be revised higher (his prediction was 201,000), the Fed “could struggle communicating the justification for hiking in September as the public’s perception of August employment,” will be based on this first estimate, he said.

Mark Hamrick, senior economic analyst at Bankrate.com, told ABC News: “I felt going into the [August jobs] report that December was a more likely date for that happen, and I think that if anything this report reaffirms that notion.”

Copyright © 2016, ABC Radio. All rights reserved.

Share on facebook
Facebook
Share on twitter
Twitter
Share on linkedin
LinkedIn
Share on email
Email
Share on print
Print