Bill Gross: ‘50-50’ Chance of Rate Hike as Jobs Numbers Released

Heading into the Labor Day weekend, Labor Secretary Tom Perez said that the August jobs report, released Friday, shows the “strong and steady recovery of the U.S. economy” as the nation added 173,000 new jobs, with the August unemployment rate at 5.1%, down from 6.1% a year ago.

August, Perez said, “was the 66th consecutive month of private-sector job growth, with private employers having now created 13.1 million jobs since the beginning of 2010.”

The Friday jobs report will be the last one Federal Reserve Board officials will see before they meet later this month to debate a potential interest rate hike.

Janus fund manager Bill Gross told Bloomberg Radio Friday morning as the jobs report was released that he sees a “50-50” chance that the Fed will raise rates on Sept. 17, with “China and global conditions” being the “dominant factor” if a rate hike occurs.

When asked “what matters most” to Federal Reserve Board Chair Janet Yellen, Gross replied: “Financial conditions, although she wouldn’t place it number one in a press conference.”

While Yellen thinks that “growth is fine,” Gross opined, she believes “unemployment is pressing limits, and inflation ultimately will move to 2%.”

Yellen, he continued, is concerned about “imbalances in financial conditions. That means stock prices. That means yield spreads. That means money moving into various asset classes that suggest some type of potential bubble. And so financial conditions are the key for her Fed, and perhaps [the Bank of England].”

Perez noted that different sectors of the economy saw growth in August, like health care, a sector that includes traditional occupations like nursing and emerging fields like health IT. Local governments, he continued, “were also hiring, creating thousands of jobs such as teachers as our children head back to school in the fall.”

Brad McMillan, chief investment officer of Commonwealth Financial Network, noted in his Friday commentary that while jobs increased by 173,000, that was below the expected 217,000 level and down from the prior month’s estimated increase of 215,000.

July’s jobs gains, however, were revised up from the initial estimate of 215,000 to 245,000, and June was revised up by 14,000 — more than making up for the shortfall this month, McMillan said.