The US economy added almost triple the jobs expected by Wall Street in August, boosting expectations for an interest rate hike by the Federal Reserve as early as later this month.
Total nonfarm payrolls rose by 162,000 last month, the Bureau of Labor Statistics said Friday, compared with a 55,000 increase projected in a Bloomberg-compiled survey. July's tally was revised to show a gain of 21,000 from a 23,000 fall, while June's increase was adjusted upward by 11,000.
"This is the strongest pace of job expansion in five months, punctuated by also being three times greater than expected and the positive upward revisions to prior months," said Thomas Feltmate, senior economist at TD Economics. "On balance, we like the breadth and depth of this jobs report. Markets have taken note too."
Markets are now pricing in a 60% probability that the Federal Open Market Committee will raise its benchmark lending rate by 25 basis points on Sept. 16, up from 49% on Thursday, according to the CME FedWatch tool.
US President Donald Trump hailed the strong jobs report and called for an interest rate cut.
"The Fed board, with its great new leader, must get smart," Trump said in a social media post, referring to new Chair Kevin Warsh. "High interest rates put the USA at a very unfair disadvantage, and I won't allow that to happen."
Trump threatened to cut off trade with countries with which the US has a deficit, unless the Fed reduced interest rates.
Warsh described the labor market as "quite stable" a week ago, citing a 4.1% unemployment rate that he said remained low by historical standards. Warsh and other Fed policymakers appear to be focused more on the price stability side of the dual mandate, given that inflation continues to run well above the 2% target.
The unemployment rate held steady at 4.1%, as expected, BLS data showed. Private payrolls increased by 127,000 in August, more than double the projected gain of 50,000. The print follows growth of 71,000 in July.
Upward job revisions over the past two months "nearly wipe away the narrative of labor market deterioration over the summer," BMO Chief US Economist Scott Anderson wrote in a note.
"The (latest jobs) report adds important weight to the hawks' argument that inflation may not moderate back toward the Fed's 2% target in a timely manner without at least a nudge up in interest rates to help cool aggregate demand," Anderson said.
Payrolls processing firm ADP (ADP) said Wednesday that private sector employment grew at its slowest pace in seven months in August. On Thursday, outplacement firm Challenger, Gray & Christmas said US job cut announcements in August hit the lowest total for the month in four years.
On Thursday, Fed Governor Christopher Waller said he would support keeping interest rates steady if further signs of disinflation emerge, though he seemed willing to tighten monetary policy if price pressures intensify. He said his vote will be "heavily influenced" by August inflation data.
The August consumer price index report is scheduled for release on Sept. 11, ahead of the FOMC's Sept. 15-16 policy meeting.
"The August employment report was stronger than expected, but not enough to cause us to change our call for the (Fed) to remain on hold," Oxford Economics Lead US Economist Nancy Vanden Houten said in a note e-mailed to. "However, the bar for raising rates is probably lower if the Fed doesn't see progress on inflation."
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