The latest U.S. employment figures could weigh heavily on the Federal Reserve’s decision ahead of its September policy meeting, with stronger hiring giving rate-hike supporters a fresh argument.
The labor market rebounded significantly in August, adding to evidence that the economy may still have enough momentum to withstand tighter monetary policy. The development could strengthen the case for a rate increase at the Fed’s meeting in less than two weeks.
The government’s Nonfarm Payrolls report showed that employers added 162,000 jobs in August. That result easily surpassed the 56,000 consensus forecast and followed a revised increase of 21,000 jobs in July. July’s initial report had shown a decline of 23,000 positions.
The unemployment rate held steady at 4.1%, matching economists’ expectations as well as July’s reading.
Markets responded almost immediately. Bitcoin dropped roughly 2% to below $80,000 following the report. The 10-year U.S. Treasury yield rose 3.3 basis points to 4.80%, while the two-year yield gained seven basis points to 4.40%. U.S. equity futures also slipped modestly.
Rate-Hike Debate Continues
The prospect of a September rate increase returned to the spotlight last week after Fed Chairman Kevin Warsh delivered a hawkish speech at Jackson Hole.
Expectations shifted again this week when Fed Governor Chris Waller, with support from New York Fed President John Williams, indicated that a rate hike at the upcoming meeting was far from guaranteed. His comments helped fuel a rally across financial markets.
Friday’s employment figures give the Fed’s hawkish camp another reason to argue for higher rates. However, the jobs data may not be enough to settle the debate.
The next major test will come with Friday’s August consumer price index report. Inflation data is likely to play a decisive role in determining whether policymakers raise rates or leave them unchanged at the September meeting.
