Suddenly, an interest rate hike this month by the Federal Reserve looks rather unlikely.

Friday's tepid employment report for July was the latest of several signs that the economy may recently have downshifted to a slower pace.

A day earlier, the National Association of Purchasing Managers said its composite index had slipped to 50.2% in July, from 54.3% in June - surprising economists who had expected a rise to 55% in the much-watched leading indicator.

That in turn followed news from the Labor Department that its Employment Cost Index had risen just 0.8% in the entire second quarter. It was the sixth consecutive quarter that the index has risen by less than 3% on a year-to-year basis.

Fed Chairman Alan Greenspan effectively told Congress in late July that he needed to see evidence soon of a cooling economy and continued moderate inflation if a rate hike were to be averted. He has almost certainly seen just that, several economists now think.

"There's very little chance of a Fed move now," said Robert G. Dederick, economic consultant to Chicago's Northern Trust Corp., summing up the shift in sentiment about future business conditions.

Several weeks ago, the nearly universal feeling in the financial markets was that a Fed rate hike to brake the economy and head off inflation would occur at the central bank's next monetary policy session, on Aug. 20, if not before.

"The NAPM index seriously weakened the case," the Chicago economist said. "The numbers in the report were docile from front to back and top to bottom." The purchasing managers index covers wholesale prices, inventories, new orders, and delivery levels of manufactured goods; it is a key economic barometer.

"The long-expected slowdown is suddenly unfolding before our eyes," said Sung Won Sohn, chief economist at Norwest Corp. "There is really no need for the Fed to hike rates in August, maybe not until after the election, and perhaps not at all," he said.

"The Fed is certainly not going to move in August," agreed Wayne M. Ayers, chief economist at Bank of Boston Corp. "The question is whether they are finished for the year."

If the economy has truly slowed, the Fed "wouldn't want to tighten policy and be blamed for something that would have happened anyway," he said.

Mr. Dederick noted that when the Fed tightened preemptively in 1994 - a move that prompted considerable criticism - it had inflationary warning signs as support. "They don't have those now," he said.

"We do have a few signs of faster-rising wages, but they are also clearly being absorbed, and prices aren't being raised," he said.

"Rising wages do not necessarily lead to an increase in inflation," said Lacy H. Hunt, chief economist at HSBC Markets Inc. By classic definition, "inflation is too much money chasing too few goods."

Currently, he noted, the Fed's M2 money supply measure, adjusted for inflation, is unchanged from its level 10 years ago, while a post-Cold War explosion of goods and services production is evident worldwide.

In short, Mr. Hunt said, "there is tight control over money and an abundance of goods and services." This suggests that the inflation rate will continue to fall over time, he said, regardless of transitory price increases "or even the price of labor."

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