The highly anticipated US jobs report for the month of August, which was released last Friday, did not provide clarity regarding the state of the country’s economic recovery. For the US Federal Reserve, this mixed data will make their deliberations more complicated and really difficult to decide whether to hike interest rates at the September policy meeting or wait a little longer.
The US jobs data have shown that there are 173,000 added positions for the month of August. This figure indicates that job creation in the previous month was the most sluggish in five months and was way below analyst's expectation of around 220,000. However, that weak number was offset by other data in the jobs report, such as the significant decline in the unemployment rate, hitting 5.1 percent—the lowest rate since April 2008.
It seems like the report was not decisive enough to provide direction for the Fed’s decision-making on the timing of its first interest rate increase in over nine years. The data were not that upbeat to suggest that the economy of the United States could withstand the negative impact of volatility in the financial markets and a weaker global economic growth. However, the August jobs data did not clearly show that pushing interest rates higher would be unwise either.
This middling data adds to the uncertainty that the US central bank must consider as it evaluates the countervailing effects of a recovering domestic economy and the fragile global economy. The Federal Reserve is expected to closely watch the global financial situation in the coming weeks and it appears like it will have no other option but to make a policy decision based on an uncertain judgment call on the way its statements and moves will impact global economic conditions.
If the financial markets continue oscillating, the central bank of the US might be forced to delay an interest rate hike unless it hopes to test the strength of the global financial system and risk adversely affecting global economic activity.