(Reuters) - U.S. short-term interest rate futures dipped on Friday as a government report showed U.S. employers slowed hiring in August, leaving intact bets that the Federal Reserve will follow July’s interest-rate reduction with two more rate cuts this year.
The U.S. Labor Department said nonfarm payrolls expanded by 130,000 jobs last month, fewer than the 158,000 increase forecast by analysts polled by Reuters.
Domestic job growth has been slowing since mid-2018.
“Signs of maturing labor market growth were certainly evident in today’s employment report as monthly payroll additions slowed below forecasted levels,” said Charlie Ripley, senior investment strategist at Allianz Investment Management.
On the other hand, average hourly earnings grew by 0.4% in August, the largest increase since February, after rising 0.3% the month before.
This should support consumer spending and domestic inflation, Ripley said.
Traders are pricing in a quarter-point decrease in the Fed’s policy rate target, to a range of 1.75% to 2%, at the Fed’s Sept. 17-18 meeting, with a second policy easing expected by year’s end, based on futures contracts traded at CME Group.
The U.S. central bank lowered borrowing costs by a quarter point to 2.00-2.25%, marking its first rate decrease since 2008.
The mixed August payrolls report did not bolster the case for the Fed to embark on an aggressive half-point cut later this month to combat softening global demand that has been exacerbated by worries about trade tensions between China and the United States.
“All things considered, today’s employment report is unlikely to sway the Fed toward a larger 50 basis point cut at the upcoming meeting in September,” Ripley said.
(Graphic: U.S. Fed's next rate cut? - here)
Reporting by Ann Saphir; Additional reporting by Richard Leong; Editing by Steve Orlofsky