Jobs And Other Data Do Not Support September Rate Hike

August’s unemployment numbers were released today and they hardly show an economy that is on the verge of overheating. 151,000 new jobs were added during the month and the revisions for June and July basically washed each other out. The unemployment rate remained at 4.9%. Wage growth continued to grow as the hourly earnings rose by about 3 cents and is now up about 2.4% year-over-year.  On the other hand, the average work week actually declined from 34.4 hours in July to 34.3 hours in August and is down from 34.6 hours a year ago. In addition, yesterday the Institute for Supply Management released their manufacturing index and it showed that the sector was contracting in August with all three indicators, PMI, new orders, and employment index, falling below the 50% threshold that indicates contraction. All three indicators were above 50%, indicating growth, in July. And today, a report showed that auto sales had also declined sharply in August, with car sales falling 12% from July. All car and truck sales are down 4% from a year ago.

The job numbers were decent but hardly spectacular and continued wage growth was also good to see. But all the other indicators in no way point to an economy where growth is spiraling out of control, In fact, they point in the exact opposite direction. I know that everyone expects GDP growth to be robust in the second half of the year due to restocking inventory, but I’ll believe it when I see it. It is hard to see how any of these numbers would demand a rate increase this month by the Fed. But it is clear that there are many members of the committee who seem committed to a rate increase in the near future. Hopefully, these poor numbers will at least cool their desire for rate hikes until more data comes out later this year. Otherwise, it could be another rate hike disaster like the one last December.