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Jobs report misses big time but Fed could still hike in September

Janet Yellen
Andrew Harrer | Bloomberg | Getty Images

Markets immediately ruled out a September rate hike after August's disappointing jobs report, but there's still a chance the Fed could decide it needs to raise rates soon.

Goldman Sachs chief economist Jan Hatzius is one of the few in the camp that September is more likley. He said Friday a September hike is a close call but it's more likely than a December one, based on the recent Fed comments. He said the probability is 55 percent for September and 80 percent that the Fed hikes this year.

Hatzius, appearing on CNBC, said Fed officials made clear in the comments at Jackson Hole, Wyoming and elsewhere, that they were looking for confirmation that the labor market is making progress. He said: "151,000 is clearly about their estimate of what it takes to improve the labor market over time."

The economy added 151,000 jobs in August and the unemployment rate stayed unchanged at 4.9 percent. Economists had expected 180,000 jobs and an unemployment rate of 4.8 percent. Wage growth slowed to a disappointing gain of just 0.1 percent while some economists had expected 0.3 percent.

"There's still a 1-in-3 chance that the Fed moves. We know there's manufacturing weakness. We expected volatility in this report. August is a fluky month," said Tony Roth, CIO of Wilmington Trust. "The wage growth is cloudy. We're getting mixed signals."