Mixed signals – late on a friday

US payroll data, released this afternoon , was seen as crucial for the Fed ’ s rate decision on whether they will hike interest rates for the first time since 2006 later this month , or not .
The US created 173,000 jobs in August. It was less than expected, but the unemployment rate dropped to 5.1% from 5.3% – a level consistent with full employment for the economy, and previous months ’ data was revised upwards. This makes for a tough decision , made even worse by the fact that August payroll data is notorious for coming in lower than expected and then being revised upwards in ensuing months.

In addition to the economy being in full employment, another argument in favour of a hike is the better than expected increase in average hourly earnings which increased by 2.2 % on a year – on – year basis. If rates are hiked later this month, then it will probably be downplayed with rhetoric that the rate hikes will be measured and very much data dependent to ensure the recovery is not jeopardised.

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