Mixed U.S. jobs report dampens September rate hike bets

Thu Jul 2, 2015 4:40pm EDT
 
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By Lucia Mutikani

WASHINGTON (Reuters) - U.S. job growth slowed in June and Americans left the labor force in droves, tempering expectations for a September interest rate hike from the Federal Reserve.

The Labor Department said on Thursday nonfarm payrolls rose 223,000 last month after a downwardly revised 254,000 increase in May, with construction and government employment unchanged, and the mining sector purging more jobs.

April payrolls were also lowered, meaning 60,000 fewer jobs were created during the two months than previously reported. The unemployment rate fell two-tenths of a percentage point to 5.3 percent, the lowest since April 2008, but that was a sign of weakness as 432,000 people dropped out of the labor force.

"While we've been seeing positive signs of the economy picking up moving into the second half, this report certainly isn't pushing the Fed to accelerate the liftoff timeline," said Ted Wieseman, an economist at Morgan Stanley in New York.

Still, June's payrolls increase ran well above the average for the first five months and the jobless rate is near the 5.0 percent to 5.2 percent range most Fed officials consider consistent with full employment.

Before the report, interest rate futures were pricing in a more than 50 percent chance of a December hike, but bets shifted to early 2016. Economists still believe the Fed, which has kept its short-term interest rate near zero since December 2008, will tighten monetary policy this year.

The dollar fell marginally against a basket of currencies, while prices for U.S. Treasury debt ended higher. U.S. stocks closed little changed on festering worries over Greece's debt crisis.

From consumer spending to housing and consumer confidence, economic reports had taken a decisively strong tenor since May, prompting many forecasters to raise their second-quarter growth estimates to above a 3 percent annual pace.   Continued...

 
Paige Leonard speaks with a recruiter from a jewelry and gem company during the Gemological Institute Of America (GIA)'s Jewelry Career Fair in New York in this file photo from July 30, 2012.  U.S. job growth slowed in June and Americans left the labor force in droves, according to a government report July 2, 2015 that could temper expectations for a September interest rate hike from the Federal Reserve.  REUTERS/Shannon Stapleton/Files