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Strong August jobs data keeps another jumbo rate hike by the Fed in September on the table

U.S. job growth slowed in August, but jobs last month were healthy enough that the Federal Reserve may meet later this month to approve another jumbo rate hike.

Employers added 315,000 jobs in August, the Labor Department said in its monthly payroll report released on Friday, in line with the 300,000 jobs projected by economists at Refinitiv. This is his first monthly rise since April 2021 and is down significantly from his 526,000 jumps recorded in July.

Meanwhile, the unemployment rate unexpectedly rose to a six-month high of 3.7% as the labor force participation rate rose.

Wages also continued to rise, but were below expectations. Average hourly earnings he increased by 0.3% in a month and increased by 5.2% over the previous year. This is slightly below Refintiv’s estimates of 0.4% and 5.3%, respectively.

Fed raises rates by 75 basis points in another historic move to combat inflation

Currently Hiring Signs in Deleware

A hiring sign is posted in front of a restaurant in Rehoboth Beach, Delaware, March 19, 2022. ((Photo by Stephanie Reynolds/AFP via Getty Images)/Getty Images)

Initially, the market reacted positively to the report, but stocks ended lower on Friday after employment data left another 75 basis points of rate hikes possible later this month. The S&P 500 is down his 1.1%, the Dow Jones Industrial Average is down his 1.1% and the Nasdaq is down his 1.3%.

ticker safety last Change change %
Me: DJI dow jones average 31318.44 -337.98 -1.07%
I:COMP NASDAQ Composite Index 11630.864481 -154.26 -1.31%
SP500 S&P 500 3924.26 -42.59 -1.07%

RSM chief economist Joe Bruce Elas said: “This data suggests the Fed is unlikely to derail its current monetary policy trajectory.” We should try to raise the federal funds rate to 4% in the near future.”

Monthly job posting data is always important, federal reserve I’ve been watching this particular report closely for signs that the labor market is starting to slow from a frenetic pace as policy makers try to tackle inflation.

Policy makers have already approved back-to-back rate hikes of 75 basis points in June and July, suggesting further rate hikes of that magnitude could be considered in September, depending on upcoming economic data. increase.

Friday’s report offered little insight as to whether the Fed would raise rates by three-quarters of a percentage point or a slightly smaller but still drastic 0.5 point hike. The uniformity of the report leaves the door open for a third 75-point increase, according to experts.

Federal Reserve Chairman Jerome Powell

Federal Reserve Chairman Jerome Powell speaks at a news conference at the Federal Reserve Building in Washington, Wednesday, July 27, 2022. (AP Photo/Manuel Barce Seneta/AP Image)

“Even though job growth slowed in August and the unemployment rate rose, those numbers were a little more sharp than the Fed expected during the September FOMC meeting,” said Ben Ayers, senior economist at Nationwide. “High inflation remains the main focus and the labor market continues to show signs of strength.”

Traders are already pricing in a 58% chance of another 75 basis point rate hike at the close of the two-day Fed meeting on Sept. 21, according to CME Group’s FedWatch tool, which tracks trades. However, another 44% believe he will instead raise the Fed’s rate by half a point.

The report came out just a week after the Fed chairman Jerome Powell He stunned markets with his keynote speech in Jackson Hole, Wyoming, during which he is determined to fight inflation regardless of its potential economic impact.

Fed rate hike won’t stop inflation if government spending stays high, paper says

“Higher interest rates, slower economic growth and a weaker labor market will keep inflation down, but will also cause some pain for households and businesses,” Powell said. “These are the unfortunate costs of keeping inflation under control, but failure to restore price stability will be far more painful.”

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