US rate hike unlikely this month with weak job data

Economists rule out such move by Fed as chairman Yellen also notes soft economy

An interest rate hike in the United States is now looking less likely, on the back of slower-than-expected job creation in the world's largest economy.

There were 151,000 jobs added to the US economy last month, below economists' forecasts of 180,000 and a marked slowdown from the previous two months.

More than 250,000 jobs were created each month in June and July.

The data also showed that wage growth slowed and the unemployment rate held steady at 4.9 per cent, despite hopes that it might edge downwards.

The latest disappointing job data has sparked off a debate among economists over the prospect of an interest rate hike. The figures are the last major employment measure before US Federal Reserve officials meet on Sept 20 and 21.

Most analysts believe the weaker-than-expected figures all but rule out the chance of a rate rise from the US central bank this month.

Still, a rate hike should be seen as positive development when it eventually happens, economists say.

It will be a sign that the US economy has recovered sufficiently from the 2008 global financial crisis to tolerate a higher cost of borrowing.

The Federal Reserve had previously hinted that it might raise rates before the end of this year, but chairman Janet Yellen has also expressed concerns about the soft economy and said policymakers will be watching the data closely.

The Fed last raised borrowing costs in December, the first such move in almost a decade.

Since then, it has held off any further moves amid low inflation and mixed news on the US economy.

There are also concerns about the global outlook - for instance, the possible repercussions from Britain's vote to leave the European Union, as well as a broader slowdown in world trade and economic growth.

Still, a rate hike should be seen as positive development when it eventually happens, economists say.

It will be a sign that the US economy has recovered sufficiently from the 2008 global financial crisis to tolerate a higher cost of borrowing.

This will spell good news for the rest of the world - in particular, Asian exporters like Singapore, for whom the US is a major source of demand.

A version of this article appeared in the print edition of The Straits Times on September 06, 2016, with the headline 'US rate hike unlikely this month with weak job data'. Print Edition | Subscribe