Fed Chair Janet Yellen’s July proclamation that “the case for an increase in the federal funds rate has strengthened,” was nullified by a weaker than expected August jobs report. Only 151,000 jobs were added, short of the 180,000 forecast by economists and far short of the 275,000 added in July.
Some analysts were quick to point out that historically August is the worst month for jobs increases. Even so, the likelihood of a September rate hike is highly unlikely.
Further, wage growth slowed–after showing signs of momentum in previous months–with paychecks growing only 2.4% last month compared to a year ago. In this “recovery,” wages have been slow to move in the right direction.
An analysis of the report shows still more bad news: Employment in construction, manufacturing and mining — typically good-paying jobs — declined in August. All together, those industries lost 24,000 jobs last month.
The jobs gained came in financial services, health care and food industries. The latter two are notoriously low wage-paying industries.
Overall the economy is slowing, as evidenced by GDP averaging only 1% in the first half of this year and increasing only 1.1% over the last 12 months.
Optimists quickly noted that “the U.S. economy has added over a 1 million jobs so far this year,” which sounds like a lot. However, that number pales compared to the 2.65 million jobs increase in 2015.
Now, the speculation will begin as to whether the Fed will hike rates at their December meeting.
In December 2015, I predicted no rate hike and got it wrong, but not by much as a weak economy kept the Fed from raising ever since. I doubt there will be a rate hike this year, with the caveat that maybe–just maybe–the Fed will raise rates in December simply to save face.
Regardless of the Fed’s decision in December, monetary policy remains loose, which bodes well for gold and silver. Not to be forgotten is that the whole world is embracing loose money. Price inflation is guaranteed, it’s only a matter of time, and gold and silver prices will move to the upside.
