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Lackluster Jobs Data Extends 'Groundhog Day' Limbo for the Fed

And now the Federal Reserve sees 12 more weeks of winter.

The U.S. economy added 151,000 jobs in August, the Labor Department reported Friday -- missing economists' forecasts for 170,000 new positions as the nation's unemployment rate hovered at 4.9%. Combined with very weak manufacturing data released on Thursday, the jobs data makes it much less likely that the Fed will raise the target range for short-term interest rates when it meets this month.

The low number was not a total surprise -- experts like High Frequency Economics' Jim O'Sullivan have emphasized all week that the Labor Department's initial estimate for August is often low and gets raised later.

But a low number was still considered likely to stay the hand of the central bank, which backed off an expected rate increase in June and, earlier in the year, halved an initial forecast of as many as four rate hikes.

The repetitive stop-and-go scenario is reminiscent of Groundhog Day, the 1993 film when Bill Murray played a TV reporter who lived a single day over and over until he got it right. (Murray's character had been sent to Punxsutawney, Pa., to record the activities of a groundhog, whose behavior on Feb. 2 has been traditionally linked to the timing of spring weather.)

"The Fed knows about the quirks with the August employment report and that odds are it will be revised higher," Moody's Analytics economist Ryan Sweet said. "However, they could struggle communicating the justification for hiking in September as...