U.S. employment growth in August came in far above market expectations, a sign that the labor market is not cooling as sharply as feared even as inflation pressure remains elevated in the wake of the war in Iran. Analysts said the data could revive expectations for a Federal Reserve interest rate increase in September.
The Bureau of Labor Statistics said on the 4th that nonfarm payrolls rose by 162,000 in August from the previous month. That far exceeded the 55,000 gain forecast in a Bloomberg survey of economists, and marked a sharp acceleration from the 21,000 increase in July.
July's figure was revised up to a gain of 21,000 from an initially reported decline of 23,000. June's increase was also revised higher, to 31,000 from 20,000.
The unemployment rate held at 4.1%, unchanged from a month earlier and in line with market expectations. The number of unemployed people was little changed at 7 million. The labor force participation rate edged up to 61.6% from 61.4% in July.
The stronger-than-expected data prompted markets to raise the odds of a Fed rate increase in September. According to the CME FedWatch tool, the probability of a September hike priced into interest rate futures rose above 50% immediately after the jobs report, up slightly from about 49% the previous day. Ira Jersey, a strategist at Bloomberg Intelligence, said that with the payroll gain larger than expected and prior months revised higher, it would be difficult for markets to price in no chance of a September increase.
Still, some analysts said a single jobs report is not enough to cement the case for a rate increase. Experts describe the U.S. labor market as close to a "no-hire, no-fire" state, in which both hiring and layoffs are subdued.
Senior Fed officials have also urged caution. Fed Governor Christopher Waller, a permanent voting member of the policy committee, told Reuters a day earlier that signs of disinflation were finally emerging and that he would support holding rates steady if data released over the next two weeks pointed in the same direction. His comments signaled the possibility of a pause, following New York Fed President John Williams' cautious stance on raising rates.
