Economists Weigh In On August Jobs Report, If The Fed Will Raise Rates In September

The August jobs report released by the Bureau of Labor Statistics on Friday showed job creation outperformed expectations, but the unemployment rate edged up and wage growth moderated more than anticipated.

Here's what you need to know about the report, what economists think about the data and insights into how the Federal Reserve may react.

Key Takeaways: Non-farm payrolls exceeded predictions as August saw growth of 187,000, ahead of the 170,000 projection.

The unemployment rate rose from 3.5% to 3.8%.

Average hourly earnings increased 4.3% year-over-year, falling short of the expected 4.4%. Read more on the data here.

What Do The Economists Think? Chris Zaccarelli, chief investment officer for Independent Advisor Alliance, said the report was favorable for the Fed: “The Fed couldn't hope for a better report in their fight against inflation. Wages are down slightly and the unemployment rate ticked up, both of which are signs that wage pressures and an overheated job market are subsiding.”

Zaccarelli noted investors should cheer the report as well. “The stock market should cheer this data since it removes the risk of a Fed rate hike in September, and if these trends continue, they may not need to raise rates again this year.”

Read Also: Manufacturing PMI Inches Higher, But Still Signals Industry Contraction, Cements Case For Interest Rates On Hold

Quincy Krosby, chief global strategist for LPL Financial, said the jobs report could result in the Fed maintaining its current rates for a more extended period.

“With the surge in the participation rate of workers coming into the workforce, coupled with wages easing and an uptick in the unemployment rate to 3.8%, the futures market remains positive,” Krosby noted.

Jeffrey Roach, chief economist for LPL Financial, gave a nuanced take, pointing out that despite the rise in unemployment, the report was indicative of a fairly robust labor market.

“Businesses added 187,000 to their payrolls in August and the gains were fairly broad-based. It may take longer than anticipated for businesses to feel the full impact of higher rates,” Roach said.

Charlie Ripley, senior investment strategist for Allianz Investment Management, noted "Data provided further evidence that the labor conditions in the U.S. are continuing to loosen up. From a data-dependent Fed perspective, the economic data we have seen in August in conjunction with today's jobs report certainly reinforces the idea that we have seen the last rate hike during this cycle.”

Based on the economists’ observations, the markets could take the report as a sign that the Fed will maintain interest rates at their current levels, at least in the near term.

Read Next: Fed’s Favored Inflation Gauge Matches Expectations: July PCE Price Index Inches Up To 3.3%

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