Schroders: Fed unlikely to budge

The US economy continues to generate jobs with 209,000 added to payrolls in July and the unemployment rate dropping back to 4.3%. Job gains were led by the service sector with the goods sector lagging behind, particularly construction. Average hourly earnings picked up a little to 0.3% month-on-month, but the year-on-year rate remains at 2.5%.

The best indicator for wage growth is probably the ratio of employment-to-working population, which captures the effect of lower participation. This has been nudging higher, indicating better wage growth at some stage. Meanwhile though, stronger wages remain elusive.

Although this has to be seen as a robust report, we still see the Federal Reserve remaining on hold for the rest of the year as inflation remains weak and balance sheet reduction induces caution.