US employment report may affect September interest rate hike expectations

According to reports, in June, US job growth decreased and weakened expectations regarding interest rate hike from the Federal Reserve in September. It has been reported that last month, nonfarm payrolls increased 223,000, down from 254,000 in May.

This was as a result of construction and unchanged government employment in addition to axing of more jobs in mining, according to the Labor Department. Reports say that there were 60,000 fewer jobs in April and May compared to what was reported earlier.

It has been reported that the unemployment rate dropped two-tenths of a percentage point to 5.3%. However, it led to weakness as approximately 432,000 people left the labour force.

The decrease in employment affected the labour force participation rate or the share of working-age Americans who are having a job or looking for it, by bringing it down to 62.6%. It is the lowest reading since October 1977. As per reports, in May, the participation rate reached a four-month high of 62.9%.

According to economists, the Fed would probably not increase interest rates in near future as a result of weaker employment report and the current debt crisis in Greece.

According to Diane Swonk, chief economist at Mesirow Financial in Chicago, "The glass is still half full and not able to quench the thirst of many. The Fed will need to see a strong bounce back in participation to stick to their guns and achieve liftoff in September".

It was reported that average hourly earnings rose 2.0% in the 12 months through June, slowing down from 2.3% in May.