August’s job growth came in slightly lower than estimates. However, it is unlikely to change the Fed’s plan for an additional rate hike this year, according to analysts.
The unemployment rate inched up to 4.4 percent in August from a 16-year low of 4.3 percent in July. And total nonfarm payroll employment rose by 156,000 in August, according to the Bureau of Labor Statistics (BLS) report published on Sept. 1. This was slightly lower than average employment growth of 176,000 per month so far this year and below a consensus forecast of 180,000.
Meanwhile, average hourly wages for all employees on private nonfarm payrolls increased by 3 cents to $26.39. In the last 12 months, wages increased by 2.5 percent versus the consensus forecast of 2.6 percent.
The largest job gains over the month occurred in manufacturing, construction, and professional and business services.
Manufacturing added 36,000 jobs in August, the third consecutive month of strong gains. Motor vehicles and parts accounted for much of the manufacturing sector’s job gain, despite a recent slowdown in auto sales. Manufacturing gained 155,000 jobs since reaching a recent employment low in November last year.
The construction industry recorded 28,000 new jobs in August, after a stagnant growth in the last five months.
Employment growth in education and health services and leisure and hospitality were relatively weak compared to previous months.
Although job gains and wage growth are lower than the consensus estimates, the August employment report will not affect the monetary policy outlook, according to Goldman Sachs analyst Spencer Hill.
“There are several months between now and December to make up for any weakness,” he wrote in a report.
Depending on inflation trends, Fed officials may increase interest rates one more time this year, which may happen in December according to market estimates.
“The report was marginally disappointing for those looking for higher inflation, but not too far from our expectations,” stated Citi analyst Andrew Hollenhorst.
The job numbers will not change the inflation outlook, he wrote. “Markets and the Fed will remain in ‘wait and see’ mode.”
President Donald Trump’s business-friendly promises, including tax reform and regulatory relief, have raised the expectations for job growth, especially in the manufacturing sector. According to a report from the Institute for Supply Management, U.S. manufacturing activity hit a six-year high in August.
The index of factory activity increased 2.5 percent to 58.8 in August compared to July, signaling an expansion in the sector based on factors such as sales, inventory, and employment.
