Disappointing Nonfarm Payrolls Data Puts the Brakes on Fed Interest Rate Hike

Today’s nonfarm payrolls report came in with 38,000 jobs created last month, far below the 160,000 anticipated. It was quite a wakeup call for the Fed, who had been enjoying most of the week’s economic news up to that point. Jobless claims had dropped, the ISM Manufacturing Purchasing Managers Index Report came in with a surprising gain instead of an anticipated loss, and the ADP Research Institute had reported a significant increase in U.S. non-farm private sector employment, small business employment, and U.S. franchise employment.

The upcoming Brexit vote in Britain was probably the biggest reason for Fed caution when considering an interest rate increase in June. But this reported lack of job creation has probably taken a June rate hike off the table. A July hike has probably become iffy at best and perhaps September is looking like the earliest opportunity for an increase. The Fed remains determined to resume increases, in order to improve Dollar strength, particularly in light of the growing list of countries adopting negative interest rates and China’s stepped up “Replace the U.S. Dollar as the lead Global Reserve Currency” campaign.