U.S. unemployment falls to 5.1%

The U.S. unemployment rate fell to a seven-year low in August, with employers adding 173,000 jobs. The Labor Department says the jobless rate fell to 5.1 %, a level consistent with a normal economy and the lowest recorded since April 2008.

Experts suggest this will be a key data point for the Federal Reserve when it comes to deciding whether to raise interest rates from record lows later this month.

Rick Rieder, CIO of Fundamental Fixed Income at BlackRock, says in a recent release, “Today’s nonfarm payrolls print of 173,000 jobs gained (which is below the consensus estimate) will disappoint some. But does not come as a surprise due to the August report’s typical seasonal weakness. Further, we continue to believe that this labor market is illustrative of broader strength in the economy, a point underscored by solid upward revisions to June and July employment numbers (both to 245,000, for a total of 44,000 jobs more than previously estimated).”

He adds, “The longer-term strength in labor markets is also highlighted by the fact that the three-month, six-month, and 12-month moving average payroll gains came in at 221,000, 205,000, and 243,000, respectively, which is still considerably stronger than the average level of jobs growth that has been typical of past periods of economic expansion.”

Regarding the Fed, Rieder says it’s clear that its employment mandate has been filled, if you consider “labor market statistics such as the unemployment rate, consistently strong monthly payroll reports, job openings, jobs-hard-to-fill surveys, and the fact that almost six million workers have been hired over the past two years (which, combined, is more than the 13 years prior to that).”

However, he notes, “That’s not to say that there are not some pockets of slack in the labor force, or that there aren’t many people in today’s economy who can and should be hired. We would argue that the Fed must determine the costs versus the benefit of maintaining interest rates at ’emergency conditions,’ relative to this level of marginal labor force slack.” For more from Rieder, click here.

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Associated Press says Friday’s report appears neither so strong nor so weak as to tilt the Fed decisively toward either a rate hike or against one. Still, as the final report on the job market before the Fed meets September 16th and 17th, it’s one of the most significant pieces of evidence it will consider.

Read: Currency is key to future of economy, for more on Canada

Many economists think the Fed will decide in two weeks to raise its benchmark rate for the first time in nine years. At the same time, stock market turbulence, a persistently low inflation rate and a sharp slowdown in China have complicated the decision.

Chris Williamson, chief economist at the financial information firm Markit, said Friday’s report provided “frustratingly little new insight into whether the Fed will start to raise rates.”

He adds, “A bumper payrolls number would have sealed the case for higher interest rates in many people minds, while a low number would have dealt a blow to any chances of tightening of policy at the next meeting.”

Read: Would wage hike bolster U.S. consumers?

Once the Fed begins raising borrowing rates, higher rates are likely to eventually ripple through the economy. Americans could face higher costs for mortgages and other loans, though the increases could be modest and gradual.

A key question is how a faltering China, slow growth in Europe and a strong dollar will affect the overall U.S. economy. The answer probably won’t be clear for months.

Friday’s jobs data was gathered before the U.S. stock market plunged in late August, after signs emerged that China’s troubles were worsening.

“This report settles little, we think, leaving the next two weeks essentially as unsettled as they were prior to the report’s release,” says Dan Greenhaus, chief market strategist at institutional brokerage BTIG LLC.

A stumbling global economy and stronger dollar, which makes U.S. exports costlier overseas, could slice a percentage point off U.S. growth through the second half of next year, according to economists at Goldman Sachs.

More so than other months, August’s jobs totals typically undershoot the revisions that the government provides later. The government struggles to seasonally adjust the data for the millions of summer jobs that are eliminated throughout the month. August job gains have been revised higher by 79,000 over the past five years, Goldman Sachs estimates.

Smaller companies and services firms, which are largely insulated from global trends, are still faring well. Service sector companies, such as restaurants, retailers, banks and construction companies are expanding at the fastest pace in nearly a decade, according to a survey by the Institute for Supply Management.

But manufacturing firms have been stumbling amid the global headwinds. Manufacturers cut 17,000 jobs in August, the most since July 2013. Construction companies added just 3,000, even though home building and other construction have picked up.

The number of Americans seeking unemployment benefits remains very low by historical standards—evidence that companies are still confident enough about customer demand to maintain their staff levels.

There are other signs that the U.S. job market remains solid. First, Americans overall have a brighter outlook, according to the Conference Board’s consumer confidence survey. It found nearly 22 % of Americans said jobs were plentiful in August. That matched the proportion that said jobs were hard to get, and it’s the first time since early 2008 that the two figures have been equal.