A stronger-than-expected U.S. jobs report has added fresh uncertainty to the Federal Reserve’s September rate decision, as a rebound in hiring gives policymakers favoring higher interest rates more evidence to support their position.
The U.S. economy added 162,000 jobs in August, according to the government’s Nonfarm Payrolls report released Friday. The increase was far above the 56,000 jobs economists had expected and marked a sharp improvement from July’s revised gain of 21,000. July’s initial estimate had shown a loss of 23,000 jobs.
The unemployment rate was unchanged at 4.1%, matching both the market forecast and July’s figure.
Markets reacted quickly to the stronger labor-market data. Bitcoin fell roughly 2% to below $80,000, while the 10-year Treasury yield rose 3.3 basis points to 4.80%. The two-year Treasury yield increased seven basis points to 4.40%, and U.S. stock futures edged lower.
Fed Policy Back in Focus
The latest figures arrive as officials debate whether another rate increase is appropriate at the Fed’s meeting in less than two weeks.
Fed Chairman Kevin Warsh revived expectations for a September hike with a hawkish Jackson Hole speech last week. However, those expectations weakened this week after Fed Governor Chris Waller, with support from New York Fed President John Williams, indicated that a rate increase was not yet certain.
The August employment report now provides the Fed’s hawkish camp with another reason to argue for tighter policy. A resilient labor market could make policymakers more comfortable maintaining or raising rates if inflation remains elevated.
Still, the jobs figures are unlikely to be the final factor in the decision. Investors and Fed officials will be closely watching next Friday’s August consumer price index report, which could provide a clearer indication of the direction of monetary policy at the September meeting.
