The symbolism would be perfect. When the Federal Reserve announces its decision on US interest rates on 17 September it will be almost seven years to the day since Lehman Brothers went bust. That was the moment when the financial crisis went nuclear, ushering in the era of ultra-low interest rates.
That era now looks to be coming to an end. The latest set of US unemployment figures were unspectacular, and would have been seen as modest in previous economic cycles. The increase in non-farm payrolls was 10,000 smaller than Wall Street had been expecting.
But that’s not the issue. What the financial markets wanted to know was whether the unemployment data would be weak enough to push back the timing of the first Fed rate rise since the summer of 2006 from September to December. They weren’t.
The state of the labour market matters to the US central bank. It looks not just at the number of jobs the American economy is creating, but at the unemployment rate, the average number of hours worked per hour and the sort of pay rises American workers are getting.
There was something for both hawks and doves in the latest data. The rate of job creation has slowed but the payroll numbers for both May and June have been revised up. The unemployment rate held steady but is already at the levels the Fed expected it to be at by the end of the year. Hours worked rose slightly but there is no evidence of wage inflation starting to accelerate.
If the Fed was of a mind to delay a rate rise until December there was nothing in the payrolls to prevent them from doing so. But, equally, there was nothing to prevent them tightening policy either. And all the signs are that the Fed does want to move in September unless there is compelling evidence to do otherwise.
Certainly, the less-than-sparkling payroll numbers point to rates rising only slowly. But the Fed would only have abandoned its September timetable had the increase in jobs been 150,000 or lower, rather than 215,000.
