The U.S. interest rate hike so many investors were banking on either this month or in July may not happen in the near-term after the U.S. economy added just 38,000 jobs in May.
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During an interview on FOX Business Network’s Varney & Co. Austan Goolsbee, former chairman of the Council of Economic Advisors and advisor to President Obama, said there’s “no way” the Fed can act now on raising interest rates.
"It’s modest job growth—this was a tough month for sure and the trend is not great,” he said.
Economists were expecting the addition of 162,000 jobs. Not only did the U.S. Department of Labor come up short, job growth was also revised lower for March and April. The unemployment rate declined slightly to 4.7%.
The probability of a rate hike at the Fed’s June 14-15 meeting plummeted to just 4% from around 20% as tracked by the CME’s Fed Watch Tool.
This reflects fresh concerns about a recession, something Goolsbee warned about just last month during an appearance on Varney & Co.
“You cannot rule out, given what’s happening in the rest of the world, there’s at least a 20-30% chance that the United States could go into a recession,” he said. “This is actually a very long-lived recovery that we’ve had… Eventually we will have a recession and the worse the rest of the world gets, the more likely that is for the U.S.”
Goolsbee also said that the economic data will play a bigger role in the upcoming presidential election.
“If the economy is slowing that will be tougher for Hillary Clinton because it’d be tougher for whoever the incumbent party is,” he said. “But, Donald Trump is proposing a dramatically bigger increase in the deficit than what Hillary Clinton has proposed.”