MKM Partners Says August Jobs Figures Take September Rate Hike Off The Table

While the addition of 151,000 jobs in August wasn’t a particularly bad number for the U.S. economy, it fell short of consensus expectations of 180,000. MKM Partners economist Michael Darda also believes it was soft enough to eliminate the possibility of a September interest rate hike.

“A sharp slowdown in core inflation (on a three month annualized basis) in July. The ISM Manufacturing Index slipping back into contractionary territory in August. A miss on August payrolls today. Collectively, these data points probably take a Fed rate hike off the table this month,” Darad explained.

Related Link: El-Erian: Jobs Number Creates 'Tricky Situation' For Fed

Fed funds futures seem to agree with his sentiment. The market is currently pricing in only a 26 percent chance of a September rate hike.

Allianz Chief Economic Adviser Mohamad El-Erian agrees a September rate hike is unlikely at this point, although there is still a case to be made.

“While falling short of consensus expectations, the report confirms that a robust labor market continues to underpin a solid U.S. economy that still falls short o escape velocity,” El-Erian told Bezinga.

Few economists were ever predicting a September rate hike in the first place. A Wall Street Journal poll of 62 economists in early August found that 71 percent expected the next interest rate hike to come in December.

Investors clearly like what they saw from the latest batch of economic numbers. The SPDR S&P 500 ETF Trust SPY is up 0.3 percent in Friday trading.

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