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US Payrolls Reinforce Hike Debate
Confirmed
In Short: US non-farm payrolls rose by 162,000, reigniting discussions of a Federal Reserve rate hike.
US non-farm payrolls reported a stronger-than-expected gain of 162,000 jobs in August, with unemployment holding steady at 4.1%, according to the Bureau of Labor Statistics. This positive labor market data has reignited discussions about a potential Federal Reserve rate hike, particularly at the upcoming September meeting.
The backdrop for the Federal Reserve has shifted significantly in just a week, with multiple analysts now considering a September hike, following a series of economic reports and policy statements. Takata has suggested consecutive hikes, while the BoC's slack story has survived, but the market's expectations for future hikes have diverged from the labor market reality.
While the labor market data is positive, it also increases the probability of a Federal Reserve rate hike in the near future, according to analysts at Eyeonhousing. The report suggests that the US economy has regained its footing, with just five outright monthly declines in payrolls over the past year and a half, the most recent in February.
What's confirmed
What's still developing
- EU mid-market update: AfD wins Saxony-Anhalt without a majority ahead of the Sept 20th votes; US payrolls reopened the hike debate; OPEC+ adds no Oct barrels; USD/JPY lowest since Feb. - A shortened week front-loads the risk into Thursday and Friday.
- The backdrop has changed sharply in only a week: Takata has floated consecutive hikes and steps larger than 25bp, Ueda has left September live, Bessent has said Abenomics has run its course, and even Takaichi adviser Takuji Aida - previously a reflationist brake on tightening - now expects a September hike and another by January.
- The BoC's slack story survived Friday, but what didn't survive is the idea that the hikes the market is pricing have anything to do with the labour market.
- Then the curve did the strange thing: it priced in more hikes.
- In the same hour, US payrolls printed 162K against a forecast near 55K, and the two prints pulled the Loonie the same way.
- The dollar-Swiss franc saw strong rallies stall out with the benchmark pair registering modest gains of over 0.30% as the greenback was boosted by a solid US non-farm payrolls report, pushing the pair above the 50-day Simple Moving Average (SMA) to reach a daily high of 0.8126.
- "An upside surprise in payrolls will likely ramp up concerns about a rate hike, but that outcome is in the hands of next week's inflation numbers," she said.