US jobs mean no Fed rate rise in 2015

by Chris Becker

We got the all-important US unemployment release or non-farm payrolls (NFP) on Friday night and the news was mixed. While the headline unemployment number fell to a new low – only 5.1% – the internals were much less than expected. This has interest rate expectations in a flurry and suggests the Fed may hold a bit longer before releasing the interest rate lever.

More from the BLS:

Total nonfarm payroll employment increased by 173,000 in August, and the unemployment rate edged down to 5.1 percent, the U.S. Bureau of Labor Statistics reported today.

The change in total nonfarm payroll employment for June was revised from +231,000 to +245,000, and the change for July was revised from +215,000 to +245,000.

In August, average hourly earnings for all employees on private nonfarm payrolls rose by 8 cents to $25.09, following a 6-cent gain in July. Hourly earnings have risen by 2.2 percent over the year.

And from the always good Bill McBride at Calculated Risk:

In August, the year-over-year change was over 2.9 million jobs. That is a solid year-over-year gain.

1EmployYoYAug2015

The unemployment rate decline in August to 5.1%.

2UnemployAug2015

 

There was even some wage growth, from the BLS: “In August, average hourly earnings for all employees on private nonfarm payrolls rose by 8 cents to $25.09, following a 6-cent gain in July. Hourly earnings have risen by 2.2 percent over the year.”

3WagesAug2015

Nominal wage growth increased 2.1% YoY – and although the series is noisy – it does appear wage growth is trending up a little.  Wages will probably pick up a little more this year.CPI has been running under 2%, so there has been some real wage growth..

The number of persons working part time for economic reasons increased in August to 6.48 million from 6.32 million from in July.  This suggests slack still in the labor market. These workers are included in the alternate measure of labor underutilization (U-6) that declined to 10.3% in August (lowest level since June 2008).

Solid report but no cigar. Although the headline rate is very impressive, the lack of any real spike in wage growth with inflation running at circa 2%, plus the huge slack within the labor force indicates no real reason to hike right now. And as China and Emerging Markets continue to fall apart going into 2016, its wise for the Fed to holdfast.

Even the IMF agrees, with chief Christine Lagarde stating on the weekend that ” it should really do it for good, not give it a try and then have to come back”.

More from Bloomberg:

The IMF thinks that it is better to make sure that data are absolutely confirmed, that there is no uncertainty, neither on the front of price stability nor on the employment and unemployment front, before it actually makes that move.

Indeed.

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