The U.S. economy isn’t creating enough jobs to justify a rate hike by the Federal Reserve next month, say Bank of America Merrill Lynch and Goldman Sachs, whose economists pared back their forecasts on monetary policy.

“Following a string of disappointing data, the April jobs report has pushed us to change our Fed call,” writes Ethan Harris, co-head economist at the bank, in a report obtained by Newsmax Finance. “We are now looking for the Fed to hike once this year — in September — versus our prior forecast of a hike in June and December.”

Goldman Sachs economists also changed their prediction for rate hikes.

“In light of weaker-than-expected payrolls and recent Fed communication, we no longer expect a rate increase” at the Fed's June meeting, said Jan Hatzius, chief economist at the bank, in a report obtained by Newsmax Finance. The bank expects the Fed next to raise rates in September.

The Fed raised interest rates by 0.25 percentage point in December after keeping them near zero since the 2008 financial crisis. That hike was partly blamed for a more than 10 percent drop in the stock market earlier this year.

Janet Yellen, the chair of the central bank, has made a priority of using monetary policy to support the jobs market and spur demand as reflected in rising prices for goods and services. The U.S. economy added 160,000 jobs in April, the fewest in seven months, disappointing economists who forecast 202,000 new hires, according to the Labor Department.

“There has been a loss of momentum in the U.S. data,” BofA's Harris says. “The unemployment rate held steady at 5 percent amid a sharp 316,000 decline in household employment, but a sharp contraction in the labor force-the participation rate ended its six-month uptrend and pulled back to 62.8 percent from 63 percent.”

Harris says the jobs report wasn’t the only reason to revise estimates of rate hikes.

“It was simply the last of a string of softer indicators that has prompted us to change our forecast,” he says. “But remember, the economy is still expanding, inflation is still accelerating and the Fed is still normalizing.”

Investors don’t expect the central bank to raise rates at its June meeting, as demonstrated by Fed funds futures. They see a less than 40 percent chance of a rate hike in September, the last central bank meeting before the U.S. presidential election in November.

“Manufacturing added 4,000 jobs last month after shedding 29,000 in March, the biggest loss for the sector since December 2009,” Reuters reported. “There were further job losses in mining as the energy sector adjusts to weak profits from a recent prolonged plunge in oil prices. Mining payrolls fell 8,000 last month. Mining employment has decreased by 191,000 jobs since peaking in September 2014, with 75 percent of the losses in support activities.”

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