The U.S. labor market strengthened significantly in August. The latest employment data was substantially higher than market expectations, further providing support for the increasingly hawkish voices within the Federal Reserve and increasing the reasons for considering a rate hike at its policy meeting in less than two weeks.
The nonfarm payrolls report released by the U.S. government on Friday morning showed that the U.S. economy added 162,000 jobs in August, significantly exceeding the 56,000 generally expected by the market. Meanwhile, after revision, July employment data was adjusted from the previously reported decrease of 23,000 to an increase of 21,000, showing that the labor market was better than indicated by the previous data.
In terms of the unemployment rate, August recorded 4.1%, remaining consistent with the market expectation of 4.1% and July's 4.1%.
After the employment data was released, the market reacted quickly. Bitcoin fell about 2% and dropped below $80,000. The yield on U.S. 10-year Treasury bonds rose 3.3 basis points to 4.80%; the yield on 2-year Treasury bonds rose 7 basis points to 4.40%. Meanwhile, U.S. stock index futures edged lower.
Before the release of this employment report, different signals had already been released within the Federal Reserve regarding a rate hike in September.
One week ago, Federal Reserve Chair Kevin Warsh delivered a hawkish speech in Jackson Hole and explicitly raised the possibility of a rate hike in September. As the latest labor market data showed strong performance, the hawkish camp received further support.
However, Federal Reserve Governor Chris Waller sent relatively cautious signals this week. With the assistance of New York Fed President John Williams, Waller suggested that whether to raise interest rates at the Federal Reserve policy meeting two weeks later remained not fully determined. Such remarks had previously driven a sharp rise in the market.
Now, the latest nonfarm payrolls data has again strengthened the view of those supporting a rate hike. Although the employment market performed better than expected, the Federal Reserve's final policy judgment will still depend on subsequent economic data.
Another key indicator currently attracting market attention is the August Consumer Price Index (CPI) report to be released next Friday. The data is likely to become an important reference for the Federal Reserve when making its next interest-rate decision.