U.S. jobs data as forecast, September rate hike seen likely

U.S. employment rose at a solid clip in July and wages rebounded after a surprise stall in the prior month, signs of an improving economy that could open the door wider to a Federal Reserve interest rate hike in September. 

 

Key points:

* Nonfarm payrolls increased 215,000 last month as a pickup in construction ad manufacturing employment offset further declines in the mining sector, the Labor Department said on Friday. The unemployment rate held at a seven-year low of 5.3 percent.

* Payrolls data for May and June were revised to show 14,000 more jobs created than previously reported. In addition, the average workweek increased to 34.6 hours, the highest since February, from 34.5 hours in June. 


Comments:

  • PAUL CHRISTOPHER, HEAD GLOBAL MARKET STRATEGIST AT WELLS FARGO INVESTMENT INSTITUTE IN ST. LOUIS

“This is disappointing for anyone who’s still looking for direction. The trend of labor market improvement is still intact, but this really doesn’t give any additional clues for how quickly the Fed will act. Because this report was not extraordinarily strong, it was simply in line with expectations, that leaves the markets having to look toward other data.

“It would seem at this moment that the markets are leaning in the direction of a postponement until December of a first rate hike.”

  • KIM FORREST, SENIOR EQUITY RESEARCH ANALYST AT FORT PITT CAPITAL GROUP IN PITTSBURGH, PENN.

"Everything seems absolutely perfect for the Fed to raise rates in September. They have made a big deal about being a data-driven organization, so unless some super-bad information comes to them in the next 30 days, it’s pretty likely they are going to raise rates.

"The fact that the number of hours worked was up says companies are using their workforces harder and longer and generally that is a precursor to additional hiring."

  • JOHN BRIGGS, HEAD OF CROSS ASSET STRATEGY, RBS SECURITIES, STAMFORD, CONNECTICUT

“It’s the same pace as we have been seeing. It’s more of the same. It’s enough to keep the Fed on track to raise raises in September, but it’s not enough to end the debate.”

  • ANDREW FRANKEL, CO-PRESIDENT OF STUART FRANKEL & CO. IN NEW YORK

    "I think you have further confirmation that the Fed is on a path to raising interest rates as soon as next month. It continues the thought that the Fed will act certainly in the short term. For, most of our clients that's their expectation.

    "It's another number that doesn't derail the thought that the Fed will raise interest rates potentially as soon as next month.

    "The market has had a negative tone. It continues to have a negative tone and with the futures down seven handles it’s certainly going to open lower."

  • JACK ABLIN, CHIEF INVESTMENT OFFICER FOR BMO PRIVATE BANK IN CHICAGO, IL.

"There is nothing really to poke at here. These numbers reassure investors that the recovery, albeit fledgling, is on track and I also think that it is a strong enough number to reassure Fed governors that support the view of raising rates in September that they can go ahead. However, any move the Federal Reserve makes upfront is largely symbolic in nature because it’s going to be a 0.25 percent, and after that who knows." 

  • BRAD MCMILLAN, CHIEF INVESTMENT OFFICER FOR COMMONWEALTH FINANCIAL, WALTHAM, MASSACHUSEETS

"These numbers are right down the middle of the fairway. One thing that is interesting is the underemployment rate dropped, so we are seeing continued improvement in the areas where people really need jobs. Also the average weekly hours worked picked up to 34.6 from 34.5. When you see numbers in that range, it means the employment market is strong and there is more labor demand.

There is nothing in here that says to me the economy is so weak that the Fed needs to keep rates low. I think if we have a disastrous employment report next month, that could give them pause. But if it comes in around where these numbers are, I think it says go ahead and raise rates."

  • TOM PORCELLI, CHIEF US ECONOMIST, RBC CAPITAL MARKETS, NEW YORK

“It’s another solid report overall. If you thought that the Fed was going to go in September this report would suit that thematic nicely, I don’t think anything has changed in that regard. I think it’s another step toward the eventual liftoff.”


Market reaction: 

Stocks: U.S. stock index futures edged lower

Bonds: U.S. bond prices fell, boosting yields

Forex: The dollar rallied against the euro and yen

About the Author