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With August's addition of 151,000 new jobs—which was somewhat of a slowdown from July and June's strong payroll gains, analysts wonder if the weak numbers will impact the Federal Reserve's decision to raise interest rates this year. Bisnow spoke with three leading economists about the issue—here's what they had to say.
Jack Kern, Yardi director of research and publications
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"The August payroll report, including revisions to the June and July reports, represents an average job gain of 232,000 over the past three months.
It is important not to overreact to each monthly report, but certainly the three-month numbers are compelling enough to suggest the economy is gaining in the recovery. The balance of jobs is trending toward better-paying positions and indicates a hiring preference substantially more suited to commercial real estate demand.
There are other indicators, however, that have turned down slightly so the Federal Reserve still has some runway to decide if they want to raise rates towards year end. The most likely scenario is probably 25 bps in December with another raise following shortly into 2017."
Robert Bach, NGKF Americas director of research
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"Employers added 151,000 jobs in August, down significantly from June and July. It’s a more sustainable pace given the slow growth of the working-age population as Baby Boomers retire and the fact that hiring tends to wane late in an expansion cycle—and we’re in the eighth year of the current one, making it the fourth-longest since World War II.
So this is a pretty good number. The Fed wants to raise rates at least one more time this year, either at their meeting in three weeks or in December. Some analysts think today’s report reduces the chances of a hike this month, and they’re probably right. But the coast looks pretty clear overall, so there’s some chance they’ll go ahead and pull the trigger this month."
Rajeev Dhawan, director of economic forecasting at Georgia State University
"Today’s somewhat weak NFP, lousy ISM and moderating vehicles sales numbers all point to a growth pause. In these conditions, when momentum indicator is flat, we don’t expect the Fed to move in September or even December.
Why the pause? Presidential election-induced boardroom hesitation. We’ve had three consecutive quarters of anemic investment. We need that to turn around first. And I don’t think we’ll see corporate boardrooms investing until they know who is going to be leading the country—regardless of who it is. Once boardrooms know who it will be, then they can move forward with their CapEx plans, aka investment. Once the Fed sees this fact clearly, in durables goods numbers, Q4 GDP, only then will they move."
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