Non-farm payrolls increased by 162,000 in August, significantly exceeding the Wall Street median forecast of 55,000 and surpassing the upper bound of all institutional predictions, marking the second-largest monthly gain this year. Data for the previous two months were also revised upward: June's job additions were revised up from 20,000 to 31,000, while July's figure was substantially revised from a loss of 23,000 to a gain of 21,000. Combined, job growth for these two months was 55,000 higher than previously reported.
The unexpectedly strong performance of the U.S. labor market in August has sharply increased market expectations for a Federal Reserve rate hike in September, with swap markets indicating a probability exceeding 60%. Financial assets have subsequently experienced significant volatility.
On Friday, data released by the U.S. Bureau of Labor Statistics showed that non-farm payrolls increased by 162,000 in August, far exceeding the Wall Street median expectation of 55,000 and breaking through the upper limit of all institutional forecasts, registering the second-highest monthly increase this year. The unemployment rate remained unchanged at 4.1%, in line with expectations.
Following the data release, U.S. Treasury yields rose immediately, stock index futures came under pressure and declined, and market bets on a Federal Reserve rate hike in September intensified significantly.
The extent to which this employment data exceeded expectations was extremely rare, with the non-farm payrolls figure deviating from expectations by four standard deviations, representing the largest positive surprise so far this year. Data for the previous two months were also revised upward: June's job additions were revised up from 20,000 to 31,000, while July's figure was substantially revised from a loss of 23,000 to a gain of 21,000. Combined, job growth for these two months was 55,000 higher than previously reported.
Federal Reserve officials are expected to interpret this report as strong support for a rate hike, but the Consumer Price Index data to be released next week will play a key role in the Fed's decision later this month.
Job growth was broad-based, with notable contributions from the leisure and hospitality sector and government agencies.
Employment growth this month exhibited strong breadth:
Food services and drinking places added 59,000 jobs, well above the average monthly gain of 12,000 over the past 12 months;
Local government education added 42,000 jobs, largely offsetting the decline recorded in the previous month;
Construction added 22,000 jobs, with the non-residential specialty trade contractors segment continuing its upward trend;
The manufacturing sector added 16,000 jobs, bringing the cumulative increase since the December low to 58,000; both machinery manufacturing and fabricated metal products manufacturing recorded gains of 6,000 jobs each.
The healthcare industry added 13,000 jobs, but the pace of growth slowed compared to the average monthly gain of 32,000 over the past 12 months.
The information sector was the primary drag this month, shedding 23,000 jobs, a faster pace than the average monthly decline of 8,000 over the past 12 months. Job cuts were observed across computing infrastructure, data processing and web hosting services, publishing industries, and broadcasting and content providers.
Wages and labor force participation remained stable, with no significant intensification of inflationary pressures.
Regarding wage data, average hourly earnings in the private sector rose 0.3% month-on-month in August, in line with expectations, while the year-on-year increase stood at 3.1%. Average hourly earnings for production and nonsupervisory employees increased by 11 cents to $32.53.
The average weekly hours worked by all employees edged up by 0.1 hour to 34.4 hours. In manufacturing, average weekly hours rose to 40.5 hours, while overtime hours remained steady at 3.1 hours.
The labor force participation rate edged up to 61.6%, though it remains 0.5 percentage points below the January level. The employment-to-population ratio held steady at 59.1%, essentially unchanged from January.
The number of persons working part-time for economic reasons decreased by 414,000 to 4.4 million, indicating improved demand for full-time employment. The number of long-term unemployed individuals (unemployed for 27 weeks or more) remained largely unchanged at 1.9 million, accounting for 27% of the total unemployed population.
Market repricing occurred, with expectations for a September rate hike surging.
This strong employment report has significantly boosted market bets on a rate hike at the Federal Reserve's meeting scheduled for September 15–16.
U.S. Treasury yields climbed and stock index futures declined following the data release.
JPMorgan's Market Intelligence division had previously warned that the data would reflect a "good news is bad news" dynamic. The bank also noted that if non-farm payrolls exceeded 95,000, the S&P 500 Index could fall by 0.5% to 1.25% on the day.
Market focus will now shift to the CPI data scheduled for release next week. The trajectory of inflation data will be the final key variable in the Federal Reserve's interest rate decision this month; if the CPI also comes in above expectations, a rate hike will be all but certain.
Stay ahead of major financial events and spot investment opportunities early! Open Futubull > Market > US Stocks >Economic Calendar/Featured Macro Data, seize the investment opportunity ahead of the curve!
Editor/lambor