International Partners: The US economy created 173,000 new jobs in August according to the monthly nonfarm payrolls report published the Bureau of Labor Statistics last Friday. The number came in short of the 220,000 consensus forecast but the headline unemployment rate fell to 5.1% from 5.3%, its lowest reading since 2008.

Stock markets slumped as investors digested the data and reasoned that the miss, though notable, probably wasn’t bad enough to derail any plans the US Federal Reserve may have to raise the Fed Funds rate for the first time in a decade at the next meeting of the FOMC on 16-17 September.

“Fed Chair, Janet Yellen’s said on numerous occasions that the decision to raise interest rates is data dependent so, by that logic, this latest drop in the unemployment rate should pretty much seal the deal,” said Tim Beresford, chief economist at International Partners.

“We’re still concerned about the composition of the job gains. Healthcare and social care jobs jumped by 55,000 but manufacturing jobs fell by 17, 000,” he added.

One bright spot came with hourly wages showing a modest uptick, gaining 8 cents an hour but International Partners says it’s just not enough to make a September rate hike a ‘done deal’.

“Higher interest rates are a tool traditionally used to help take the heat out of an expanding economy. If they’re raised at a time when the economy is clearly having difficulty gaining momentum, the results could be disastrous even if it’s only a 25 basis points increase,” concluded Beresford.

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