- U.S. nonfarm payrolls increased by 162,000 in August, while the unemployment rate remained at 4.1%.
- Markets continued to price a roughly 58% probability of a 25-basis-point Federal Reserve rate increase in September.
- The Federal Reserve will announce its next interest-rate decision on Sept. 16.
The U.S. Bureau of Labor Statistics said the economy added 162,000 nonfarm jobs in August, while the unemployment rate held at 4.1%. The report left market expectations for a September Federal Reserve rate increase largely unchanged, with traders still assigning a slight edge to a 25-basis-point hike.
The labor force participation rate rose to 61.6%, according to the BLS’ August labor market report. Average hourly earnings increased 0.3% from the previous month and 3.1% from a year earlier.
The BLS also revised its estimates for June and July upward by a combined 55,000 jobs.
Rate expectations remain largely unchanged
After an initial reaction to the report, markets priced the probability of a quarter-percentage-point rate increase at about 58%, according to CME FedWatch. The probability did not change materially over the weekend, leaving markets tilted slightly toward a hike without making that outcome a certainty.
The Federal Reserve’s current target range is 3.5% to 3.75%. The central bank kept the range unchanged at its July meeting, when three members of the Federal Open Market Committee voted for an increase.
The Fed’s next meeting will take place on Sept. 15-16, 2026, with its decision scheduled for Sept. 16.
Inflation remains central to the decision
Federal Reserve Chair Kevin Warsh said in a speech at the Jackson Hole symposium that the U.S. labor market was consistent with full employment, while the inflation outlook was more concerning. Warsh said the central bank’s main focus should be price stability but did not commit to a particular rate decision.
After the jobs report, trader John Zidar said on X that the strong data bolstered the case made by policymakers favoring tighter monetary policy, though an upcoming inflation report could shift the balance.
Federal Reserve Governor Christopher Waller had previously made a similar link between inflation and the September decision. Waller said he was leaning toward leaving rates unchanged if inflation continued to cool but was prepared to consider an increase if August data showed renewed price pressures.
The employment report confirmed the labor market’s resilience but did not make a September rate increase a clear-cut outcome. Inflation data will remain a key factor for the Fed before the meeting.
Source: Incrypted
