By Jessica Menton -
U.S. stocks opened sharply lower Friday, with the Dow Jones Industrial Average dropping more than 200 points after the economy added fewer-than-expected jobs in August, suggesting the Federal Reserve will hold off on raising interest rates at its meeting this month. Following the report, the yield on the 10-year treasury fell to 2.13 percent, signaling investors are betting against the Fed raising rates.
“As far as we’re concerned, the September meeting is a 50-50 toss-up,” Paul Ashworth, chief U.S. economist at Capital Economics, said in a note.
The Dow Jones Industrial Average (INDEXDJX:.DJI) dropped 208.65 points, or 1.27 percent, to 16,166.11. The Standard & Poor's 500 index (INDEXSP:.INX) fell 22.93 points, or 1.21 percent, to 1,927.41. The Nasdaq composite (INDEXNASDAQ:.IXIC) sank 52.78 points, or 1.14 percent, to 4,680.44.
Job growth in August was somewhat disappointing at just 173,000, but the upward revisions to June and July suggest it is too early to conclude that the U.S. economy is experiencing a moderation in job growth, says Gad Levanon, director of macroeconomic and labor market research at the Conference Board.
“Given that the labor force is barely growing at all, current job growth rates will continue to rapidly lower the unemployment rate to below 5 percent by year’s end,” Levanon said in a research note.
The mixed employment report for August, coupled with the recent stock market turmoil over concerns of a slowing global economy could make central bankers pause before lifting rates at the Fed’s meeting on Sept. 16-17.
U.S. employers added 173,000 jobs in August, less than widely expected, but the unemployment rate still edged down to 5.1 percent, its lowest level since April 2008, the Labor Department said Friday.
While the decline in the unemployment may appear disappointing, the figure is discouraging to economists because more people are giving up on finding work in the U.S. labor force. Last month, the number of long-term unemployed (those jobless for 27 weeks or more) held at 2.2 million in August and accounted for 27.7 percent of the unemployed.
“The job growth this month continues in the right direction, but shows we still have almost five more years at this pace to get the share of young adult workers (those 20 to 24) back to the level of employment they had at their last peak in 2007 – too late for the current cohort,” William Spriggs, chief economist at the AFL-CIO, said in a note.