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US jobs data quashes expectations for September interest rate hike

Published 02/09/2016

The dollar weakened on the back of the news
The dollar weakened on the back of the news

US jobs data missed forecasts for the month of August, quashing expectations for a September interest rate hike from the US Federal Reserve.

US non-farm payrolls figures released Friday showed that 151,000 additional jobs were added to the market last month, missing consensus estimates for a 180,000 rise.

The dollar weakened on the back of the news, sending sterling as high as 1.33 against the US dollar.

The jobs data has muted expectations for an interest rate hike when the central bank's Federal Open Market Committee delivers its next interest rate decision on September 21.

It comes after Federal Reserve chairman Janet Yellen last month signalled that US interest rates could rise following a strong performance from the world's largest economy.

She made the comments during a speech at the Jackson Hole meeting of central bankers in Wyoming in August.

Nancy Curtin, chief investment officer of Close Brothers Asset Management, noted that the poor jobs figure follows on from a contraction in the US manufacturing sector, as exhibited in the Institute for Supply Management's index (ISM), released on Thursday.

"So soon after a weak ISM reading, today's non-farm figures may pour cold water on the prospect of a rate rise later this month, despite the Fed's upbeat assessment of the economy in August," she said.

"With the labour market pretty much at full employment already, further job creation is hard-won, but wage growth has been weaker than expected and a deceleration in jobs will not help."

Ms Curtin added: "The Fed also knows that investment growth and the associated productivity gains are crucial to businesses being able to grow wages. With productivity falling in Q2 alongside weak investment, the Fed may delay pulling the trigger on rate rises, despite strong data elsewhere in the economy."

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