August Jobs Report May Keep Fed Cautious on September Rate Decision

The US Federal Reserve's September interest rate decision may be more challenging than expected due to stronger-than-forecast August jobs data. The report showed a gain of 162,000 non-farm payrolls in August, exceeding expectations of 55,000, with leisure and hospitality and local government education leading the way.

The three-month average payroll additions rose to 71,000, while the unemployment rate remained unchanged at 4.1% and the labour force participation rate improved to 61.6%. ICICI Bank Research noted that hiring was relatively broad-based across various sectors.

However, despite the positive numbers, the report cautioned that the labour market remains weaker than its pre-pandemic trend, with a significant shortfall in payroll additions compared to the pre-pandemic steady state of around 180,000 monthly average. Wage growth also continued to moderate, with average hourly earnings rising 3.1% year-on-year in August.