JOBs
U.S. employment growth slowed more than expected in August after two straight months of robust gains and wages were tepid, which could effectively rule out an interest rate increase from the Federal Reserve this month.
Nonfarm payrolls rose by 151,000 jobs last month after an upwardly revised 275,000 increase in July, with hiring in manufacturing and construction sectors declining, the Labor Department said on Friday. The unemployment rate was unchanged at 4.9 percent as more people flocked to the labor market.
The report came on the heels of news on Thursday that the manufacturing sector contracted in August for the first time in six months, which had already cast a shadow on a rate hike at the Fed's Sept. 20-21 policy meeting.
Last month's jobs gains, however, could still be sufficient to push the U.S. central bank to tighten policy in December.
"It reduces the likelihood that the Fed will raise rates in September, but the labor market remains strong enough to support a rate hike in December," said John Silvia, chief economist at Wells Fargo Securities in Charlotte, North Carolina.
"As the August numbers have tended to come in on the softer side in the past, we think that this mostly reflects seasonal adjustment problems rather than underlying weakness," said Harm Bandholz, chief economist at UniCredit Research in New York.
A Reuters survey of the big banks that do business directly with the Fed showed 13 of the 14 so-called primary dealers expect a rate increase this year, with only three anticipating the move this month.
The smaller-than-expected rise in payrolls also likely reflects difficulties adjusting the data for seasonal fluctuations related to school calendars. Over the last several years, the government's initial August payrolls estimates have been weak only to be subsequently revised higher.
"As the August numbers have tended to come in on the softer side in the past, we think that this mostly reflects seasonal adjustment problems rather than underlying weakness," said Harm Bandholz, chief economist at UniCredit Research in New York.
Dollar
The U.S. dollar gained on Friday, erasing earlier losses, as investors viewed the Federal Reserve as still likely to raise interest rates in the coming months, despite disappointing jobs growth in August.
Nonfarm payrolls rose by 151,000 jobs last month, the Labor Department said on Friday, below the 180,000 jobs that economists had expected.
"The jobs data is not weak enough to get people to give up on their Fed view," said Marc Chandler, global head of currency strategy at Brown Brothers Harriman in New York.
The dollar index .DXY, which measures the greenback against a basket of six major currencies, rose 0.21 percent to 95.667, after earlier falling to 95.189, the lowest level since last Friday.
FED
The U.S. economy appears strong enough to warrant significantly higher interest rates, Richmond Federal Reserve Bank President Jeffrey Lacker said on Friday.
Lacker, who is not a voting member of the U.S. central bank's rate-setting committee this year, said he still favors raising rates sooner than later and that the Fed's last policy meeting in July would have been a "good time" to tighten policy.
Speaking to a group of economists in Richmond, Lacker argued that a range of economic analysis suggests the Fed's benchmark overnight interest rate — the federal funds rate — is currently too low.
"It appears that the funds rate should be significantly higher than it is now," he said in the speech.
Lacker said he was concerned the economy could heat up enough for inflation to go above the Fed's 2 percent target, hurting the central bank's credibility. He said warning about prices "might not be fashionable" given that inflation has been below target in recent years.
Oil
Oil settled up nearly 3 percent on Friday after a weak U.S. jobs report hurt the dollar and boosted commodities, but crude prices still ended the week sharply lower on concerns about oversupply.
U.S. West Texas Intermediate futures CLc1 rose $1.28, also 3 percent, to settle at $44.44. WTI fell nearly 7 percent on the week, its largest decline in eight weeks.
Reference: CNBC, Reuters
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