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Is a September Rate Hike Off the Table Now?

The August 2016 Employment Situation released by the Bureau of Labor Statistics (BLS) on Friday indicated that 151,000 jobs were added during the month, a number that fell short of expectations after June’s and July’s revised numbers of 271,000 and 275,000, respectively.

The unemployment rate held steady at 4.9 percent from July to August, and the average hourly wage bumped up by 3 cents to $25.73 (a year-over-year gain of 2.4 percent).

The August jobs report was widely viewed as the final piece of the puzzle for Federal Reserve policymakers to determine if economic growth has been sufficient enough to raise short-term interest rates. After the report fell short of expectations, some analysts have their doubts as to whether the widely-forecasted September rate hike will take place.

“While this was a solid report overall, it nonetheless fell short of expectations. Job growth and wage gains both slowed, while the unemployment rate and labor force participation remained at previous levels," said Long. “Simply put, this report is not enough to compel the Fed to raise rates in September, and the focus will shift to December as the most likely date for the next rate hike.”

Fannie Mae Chief Economist Doug Duncan expressed similar sentiments with regard to whether or not the Fed will raise rates in September.

“Despite recent attempts by Fed officials to convince the market that economic conditions are ripe for a rate hike, we believe today’s August jobs report did not pass the high bar needed for a target rate increase this month,” Duncan said. “Headline hiring slowed markedly from the prior two months to 151,000 amid weakening earnings growth and a declining workweek. However, by itself this is not a weak report given that only about 100,000 jobs need to be added monthly to hold the unemployment rate constant. While the goods sector job losses were quite discouraging, including a decline of 6,000 total construction jobs, details for residential construction hiring were more positive. Construction employment in the residential sector grew by 10,800, the biggest monthly gain since March, providing a silver lining for residential investment following bearish news on new construction spending and existing home sales at the start of the third quarter.”

On September 1, the day before the August jobs report was released, Freddie Mac reported that near-record low mortgage rates bumped up by 3 basis points from the previous week up to 3.46 percent (for the 30-year FRM) in anticipation of a September rate hike by the Fed. Rates are expected to hover around that level for the near term, and possibly even longer if a Fed rate hike does not occur in September.

Click here to view the entire August 2016 Employment Situation from the BLS.

About Author: Seth Welborn

Seth Welborn is a Harding University graduate with a degree in English and a minor in writing. He is a contributing writer for MReport. An East Texas Native, he has studied abroad in Athens, Greece and works part-time as a photographer.
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