US August Jobs Surge Fuels Fed Hike Odds

US August Jobs Surge Fuels Fed Hike Odds

The U.S. Bureau of Labor Statistics reported that non‑farm payrolls increased by 162,000 in August, far surpassing the consensus estimate of 55,000. The unemployment rate remained unchanged at 4.1%. Revised data also showed that total non‑farm payrolls for June and July were 55,000 higher than previously reported.

The stronger‑than‑expected jobs report prompted traders to reassess the Federal Reserve’s policy outlook. According to the CME FedWatch tool, the probability of a 25‑basis‑point rate hike at the September 16‑17 FOMC meeting rose from roughly 52% to about 60% after the payrolls data.

Equity markets reacted negatively on Friday. At 11:06 ET, the S&P 500 fell 0.5% to 7,710.29, the Dow Jones Industrial Average slipped 0.7% to 53,321.04, and the NASDAQ Composite dropped 0.4% to 26,473.89.

Earlier in the week, on Thursday, the major indexes had rallied on dovish signals from Fed officials. The S&P 500 had jumped 1.06%, the Nasdaq surged 1.4%, and the Dow rose 1.18% after Fed Governor Christopher Waller indicated that recent macro data showed encouraging signs of disinflation and that he would favor keeping rates unchanged if the trend persisted.

Waller’s remarks, echoed by New York Fed President John Williams, caused a rapid revision of market expectations. The odds of a September hike fell to 50.4%, down from 60.1% a day earlier and from a peak of nearly 68% earlier in the week.

Bond markets also reacted. The U.S. 10‑year Treasury yield climbed toward 4.80%, while the 30‑year yield moved above 5.25%, compressing valuation multiples for high‑growth technology stocks.

Geopolitical tension added to inflation concerns: direct military exchanges between U.S. forces and Iran in the Strait of Hormuz pushed crude oil benchmarks above $90 per barrel, reviving cost‑push inflation worries and threatening consumer spending.

The article notes that September historically records the weakest calendar month for U.S. equity returns, a risk that re‑emerged amid the heightened rate‑hike expectations.