Jobs numbers may move Fed toward rate hike

Top Wall Street banks still expect the Federal Reserve to raise interest rates in September, but a growing number now believe the central bank is likely to only hike once this year, a Reuters poll found on Friday.

American’s paychecks are still growing much more slowly than if the job market were really at full health. The Obama administration has taken notable steps in recent weeks to expand workplace protections that will ensure a stronger, more inclusive economy, including an expansion of outdated overtime protections and a draft executive order to extend earned, paid sick leave to government contractors.

Another sign the economy is still not fully healed is the unusually low participation rate – the percentage of able-bodied Americans who have a job or are seeking one. With concerns lurking behind the scenes that the Fed has gone too far in decoupling financial markets from the economy’s fundamentals, just a slight strengthening of labor market conditions (particularly on the wage front) would be enough to increase the probability of a September rate hike.

Limited wage growth in July and a job creation rate that lags behind the growing population confirm that the Fed should wait for more progress before raising interest rates, said Elise Gould, a labor economist at the liberal-leaning Economic Policy Institute.

US businesses have now added 13 million jobs over 65 months of growth-extending the longest streak on record.

Job security also appears to be improving.

The odds of a rate increase-based on trading in Fed-funds futures-at the September meeting were 56% Friday, compared with 46% before the jobs report and 48% Thursday, according to traders. After over six years into the recovery the Federal Reserve chair, Janet Yellen has now suggested that the economy needs higher rates. Employment in non-durable goods rose by 23,000 over the month, including gains in food manufacturing, which was up 9,000, and in plastics and rubber products, which was up 6,000. “Unfortunately, I think [this month] it’s more being driven by people leaving the labor market”, said Glassdoor Chief Economist Andrew Chamberlain.

June’s report was revised higher to 231,000 from 223,000, while May’s numbers were bumped to 260,000 from 254,000. So far this year, job gains have averaged 208,000 a month. The unemployment rate went unchanged at 5.3 percent – a seven-year low.

The unemployment rate remained steady at 5.3 percent, with average hourly earnings going up a nickel to just shy of $25 an hour.

Average hourly earnings increased five cents, or 0.2 per cent, last month after being flat in June.

“Employment rate among young adults, 18-34 years old, continues to grow on an upward trajectory, albeit slower”, Hepp said.

The Fed has been plotting to raise a key short-term U.S. interest rate this fall for the first time in nearly a decade.

The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) was little changed in July at 6.3 million.