US unemployment down to a seven-year low of 5.1 percent
The latest Labor Department report, issued on Friday, revealed that unemployment in the US dropped to a seven-year low of 5.1 percent in August while hiring slowed.
Total nonfarm payroll employment increased by a weaker-than-expected 173,000 jobs – the fewest number of new jobs in five months. In addition, hourly wage growth is sluggish and the percentage of people either working or looking for employment is at a 38-year low.
The report was mixed. The data wasn’t great, nor was it terrible. It is the last report providing information on the jobs market before the Federal Reserve meeting in two weeks – at which many economists expect the first Fed rate hike in nine years.
In July, Fed officials Officials said that they are waiting to see “some further improvement” in labor markets. Fed vice chairman, Stanley Fischer, said last Saturday that the Fed was going to look at the results of the August survey to help make a decision.
Fed officials say that the unemployment rate is now at a level consistent with a healthy economy similar to conditions before the recession.
But with job growth cooling off and no significant wage pressure, some may say that there is little risk in keeping rates low until the better data is released.
Mohamed El-Erian, chief economic adviser at Allianz, in Newport Beach, California, told Reuters: “With this jobs report … the Fed finds itself in a real uncertainty jam when it comes to a September interest rate hike,”
“In the run-up to its policy meeting, the Fed will pay even greater attention to global market developments.”
Chris Williamson, chief economist at the financial information firm Markit, said that the report provided “frustratingly little new insight into whether the Fed will start to raise rates.”
“A bumper payrolls number would have sealed the case for higher interest rates in many people’s minds,” he added, “while a low number would have dealt a blow to any chances of tightening of policy at the next meeting.”
In addition, there are Fed officials who became concerned about the recent market turmoil, suggesting that economic conditions may worsen.
On Tuesday, Eric Rosengren, president of the Federal Reserve Bank of Boston, said: “In my view, these developments might suggest a downward revision in the forecast that is large enough to raise concerns about whether further tightening of labor markets is likely,”