US jobs report beats all expectations, boosts case for a September hike
The US jobs report released today has exceeded expectations, with 162,000 jobs added in August, which bolsters the argument for a potential rate hike by the Federal Reserve in September. Per the full note from ing-think, the labor market showed resilience, prompting markets to increase their forecast for a rate adjustment. However, with the highly anticipated inflation report scheduled for next week, attention remains fixated on whether the Fed will act based on this latest data. Overall, the stronger labor figures provide a favorable backdrop for the dollar, setting the stage for potential volatility ahead.
What the desk is arguing
The stronger-than-anticipated US jobs report strengthens the case for a September Fed rate hike. Per the full note from ing-think, the addition of 162,000 jobs, coupled with 55,000 upward revisions to prior months, signals a robust labor market.
Additional context shows the unemployment rate holding steady at 4.1%, even with a rising participation rate, which gives further credence to Fed Chair Kevin Warsh's view that the US is near full employment. The details reveal that private sector jobs comprised 127,000 of the total, with significant contributions from sectors such as leisure, hospitality, and education.
Where it sits in our coverage
Currently, our consensus target for the USD is 1.075, with a range between 1.04 and 1.12, as we monitor market conditions closely. Noteworthy firms include: - jpmorgan: Targeting 1.10 (Mar 26) - bofa: Targeting 1.04 (Mar 26)
The desk's view aligns favorably with jpmorgan, placing us near the upper bound of this spread, while bofa offers a more conservative position, reflecting contrasting expectations about the Fed's pace.
How other firms see it
Broadly, firms like jpmorgan and others anticipate a more aggressive stance from the Fed, while bofa remains cautious about the potential for macroeconomic headwinds. This disparity may become evident in the FX pairs moving forward, notably through correlations with USD/EUR as inflation data releases approach.
What the calendar says
As it stands, the calendar does not indicate any immediate high-impact events within the next 30 days, but traders should remain vigilant for the upcoming inflation report next week, which could strongly influence market sentiment and Fed policy decisions.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01US jobs report added 162,000 jobs in August, exceeding expectations.
- 02Key sectors contributing to job growth include leisure, hospitality, and education.
- 03Federal Reserve rate hike expectations for September have increased.
- 04Upcoming inflation data may drive further market volatility.
Market implications
Traders should monitor the USD against major currencies, particularly looking for significant movements as the inflation report approaches. A sustained push above 1.075 could signal stronger bullish sentiment for the dollar, while any negative inflation surprises could challenge the bullish outlook.
Risks to this view
A reversal could be triggered by disappointing inflation data next week, undermining the case for a Fed rate hike and potentially prompting a reassessment of the job market's strength. This would likely destabilize bullish positions on the dollar.
Articles US jobs report beats all expectations, boosts case for a September hike Published 13:59 United States Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download The US added 162,000 jobs in August, above all expectations in the market, with an additional 55,000 of upward revisions to the past two months. With Fed Chair Kevin Warsh describing the US at full employment, this outcome has nudged expectations of a September rate hike higher, but the final decision hangs on next Friday's inflation print James Knightley The August jobs report was stronger than expected, with construction one of the bright spots. The stronger number could result in a September rate hike, but we still have next week's inflation numbers 162,000 US jobs added in August Better than expected Solid job gains, unemployment stays low Today has seen the release of a strong US August jobs report that makes a September Fed interest rate hike look a little more likely .
NFPs rose 162k with 55k of upward revisions to the past two months. Expectations were for just a 55k rise in total. The unemployment rate remains unchanged at 4.1% despite an improvement in the participation rate.
Wage growth is benign, rising 3.1% year-on-year. The details show the private sector contributing 127k of the 162k total new jobs, with leisure and hospitality rebounding 62k after two consecutive down months and private education & healthcare adding 29k. Construction added 22k and manufacturing added 16k.
Government was also firm despite small drops in federal and state government employment. Instead, it was local government education, which rose 42k that led the charge. That is a surprise given media coverage of falling pupil enrolment and supposed lay-offs in the sector.
Jobs growth continues to be dominated by just three sectors – private education and healthcare services, government and leisure and hospitality. This concentrated story is underscored by the fact that cumulatively, all other sectors of the economy have lost jobs since the end of 2022. That is a remarkable situation given the strength of GDP growth seen over that period and implies big productivity gains and reinforces the message about robust corporate profitability in the United States.
Cumulative increase in employment since December 2022 (000s) Source: Macrobond, ING "> Source: Macrobond, ING Labour force participation remains worryingly weak In terms of the household survey, used to calculate the unemployment rate, it showed a 569k increase in employment and a 115k increase in unemployment facilitated by a 683k increase in the civilian labour force. This is a partial correction to a startling trend of people leaving the workforce. Ten months ago, the participation rate was up at 62.6%, falling to 61.4% in July, but now back to 61.6%.
Labour force participation (%) Source: Macrobond, ING "> Source: Macrobond, ING A soft inflation print could still tempt the Fed to hold steady Unsurprisingly, the market has moved to price 16bp of a 25bp rate hike, up from 12.5bp yesterday after Fed Governor Waller's relatively dovish comments whereby he suggested a soft inflation print could mean he votes for stable policy. Next Friday's CPI report will indeed be the key decider and the 0.4% month-on-month increase in headline prices and a 0.2% increase in core (ex food and energy) prices, which is what both we and the consensus predict, is probably not cool enough to prevent Warsh nudging the rest of the FOMC into a hike. US Unemployment Jobs Federal Reserve Content Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives.
The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Author James Knightley Chief International Economist, US James Knightley is the Chief International Economist in New York. He joined the firm in 1998 in London and has been covering G7 and Western European economies.
He studied economics at Durham… In this article Solid job gains, unemployment stays low Labour force participation remains worryingly weak A soft inflation print could still tempt the Fed to hold steady
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