Jobs Report Makes Case For A 'New Normal' And A Fed Rate Hike

The United States economy added 173,000 jobs in August, but the latest jobs report did very little to shed light on whether or not the Federal Reserve will or should begin raising interest rates later this month.

While those that argue against a rate hike point to slow wage growth and lackluster inflation numbers, Indeed Chief Economist Tara Sinclair believes that the mixed economic numbers are simply the “new normal” in the US.

The Numbers

The best news from the jobs report is that the unemployment rate hit 5.1 percent, nearly half its Great Recession peak and within the Federal Reserve’s target range. However, job growth came in below expectations at only 173,000 and wages grew at only 2.2 percent during the month, well short of the Fed’s 3.5 percent target.

Related Link: Here's What The Jobs Numbers Could Do To Markets

September Rate Hike

Although Sinclair would prefer to see more people returning to the labor market, she believes that the August numbers are good enough to allow the FOMC to begin raising rates.

“Wages are rising, and inflation is nowhere to be seen, so although we would hope for stronger numbers there is an argument for a September rate hike,” she explained.

The ‘New Normal’

Sinclair points out that the recovery hasn’t been ideal, but that it’s looking more and more like the recent numbers are as good as it’s going to get for the U.S. economy for now. “If people aren’t coming back into the labor force, GDP will continue to grow relatively slowly and wages are going to grow at a lower rate than in pre-recessionary times,” she argued.

Sinclair also indicates that she sees no evidence that a potential September rate hike would choke off U.S. economic growth.