US NFP report weakens case for near-term rate rise - ING

James Knightley, Senior Economist at ING, suggests that the weaker than hoped job creation and subdued wage growth suggests little need for imminent action from the Federal Reserve.

Key Quotes

“The US labour report for August is a little soft with payrolls rising 151,000 versus the 180,000 consensus. That said, we had thought that three strong months of job creation in a row was too good to be true given what has been a fairly mixed performance for the US economy over the past couple of quarters. There was only 1000 of downward revisions to the past couple of months’ data.

Private sector payrolls growth was disappointing, rising just 126,000, while government sector jobs continued on their decent run, having increased 133,000 in the past four months. The unemployment rate remained at 4.9% while wage growth was poor, increasing just 0.1%MoM/2.4%YoY. We had been hoping for a slight acceleration given the tightening in the labour market. Nonetheless, there is growing evidence to suggest that workers moving jobs have been more successful in getting higher pay. Over time this should translate into broader increase in wages as firms become more concerned about staff retention.

The report doesn’t support the case for a September rate hike, probably being more consistent with our current view that 1Q17 is the more likely point the Fed chooses to raise rates. After all inflation pressures are very benign and the US election has the potential to weigh on sentiment and activity a touch. On the other hand, an increasing number of Fed speakers have suggested that they are comfortable to hike rates despite relatively subdued employment growth meaning a December move should not be ruled out.”