The August jobs numbers — the last major report on the economy that the Federal Reserve will digest before its mid-September meeting — gave economy watchers no clear indication that the central bank is now more likely to raise interest rates this month.
Setting aside the drop in the August jobless rate to 5.1 percent, job growth of 173,000 was the smallest in five months. So what could nudge the Fed toward its first interest-rate increase since June of 2006?
One added factor might be a continuing increase in wages. The Labor Department’s jobs report said average hourly earnings rose by 8 cents in August, to $25.09, after a 6-cent gain in July. The wage increase was the largest since January.
"The payrolls data is certainly good enough to allow for a Fed rate hike in September," Alan Ruskin, global head of currency strategy at Deutsche Bank in New York, told Reuters. "The big question is still whether financial market volatility will scupper the plans."
Separately, three U.S. automakers last week reported August sales that were better than expected. Ford Motor Co. sales grew 5.4 percent for the month and Fiat Chrysler Automobiles NV had a 1.7 percent increase. General Motors Corp. sales were down 0.7 percent, but above expectations.
MarketWatch reported that the seasonally adjusted annualized sales rate is expected to come in above 17 million new cars and trucks for the fourth month in a row amid low lease rates, cheap gasoline and consumer enthusiasm.
GM estimated that the closely watched figure hit 17.5 million in August and Fiat Chrysler estimated 17.8 million. The last time the industry had a four-month sales streak above 17 million vehicles was 2006.
In a report that arrived the day after auto sales figures were released, new orders for U.S. factory goods rose for a second straight month in July on strong demand for cars. The Commerce Department said new orders for manufactured goods rose 0.4 percent after an upwardly revised 2.2 percent increase in June.
Meanwhile, the Fed itself said Wednesday that most of the country is showing solid economic growth. Eleven of 12 Fed districts reported moderate or modest growth in the central bank’s latest beige book report, which covers economic activity from July through mid-August, the Wall Street Journal reported.
Among the economy’s strengths, the Fed said, the housing market had “widely improved,” with home resales and prices climbing. But it also warned of growing obstacles facing American manufacturers, particularly the strong dollar, depressed oil prices and an economic slowdown in Asia.
The New York Times said the August jobs report strengthens the position of Fed doves who may want to wait until December to take action on rates. On the other hand, the drop in the jobless rate also leaves it near what the Fed considers to be full employment, fueling the central bank’s hawks.
“The latest jobs data will leave everyone maintaining their position on the Fed,” Steven Ricchiuto, chief economist at Mizuho Securities USA, told the Times. “Not the decisive data the Street wanted.”