Traders trim bets on Fed rate hike as U.S. job gains slow

Louisville Assembly Plant employees work to assemble the new 2013 Ford Escape on the production line in Louisville, Kentucky, June 13, 2012. REUTERS/John Sommers II/File Photo

(Reuters) - Traders of U.S. short-term interest rate futures trimmed expectations that the Federal Reserve could soon lift interest rates after a government report showed U.S. employers added fewer jobs than expected last month.

Nonfarm payrolls rose by 151,000 jobs last month after an upwardly revised 275,000 increase in July, the Labor Department said on Friday. Economists had expected a gain of 180,000.

“It is not a compelling number for the Fed and it is not going to force their hand for a hike in September,” said Thomas Simons, an analyst at Jefferies.

The Fed is now seen as only slightly more likely to raise rates in December than to wait until next year before raising rates. Traders are all but ruling out a rate hike later this month.

Before the report traders saw better than even odds of a December rate hike, based on trading in futures tied to the Fed’s policy rate, and a one-in-four chance of a rate hike when the Fed meets Sept. 20-21.

Reporting by Ann Saphir; Editing by Chizu Nomiyama