Fed Faces Tough Call as Labour Market Resilience Fuels Rate Hike Pressure

The US labour market's resilience has put pressure on the Federal Reserve to consider a September rate hike, according to ICICI Bank Research. The research firm noted that hiring was relatively broad-based across various sectors in August, including food services and drinking places, construction, manufacturing, healthcare, and education.

However, despite the stronger-than-expected jobs report, signs of underlying softness persist in the labour market. The three-month average payroll additions remain below pre-pandemic trends, at 71,000, compared to a monthly average of around 180,000 during the steady state before the pandemic.

Wage growth also continued to moderate, with average hourly earnings rising 3.1% year-on-year in August, down from 3.2% in July. ICICI Bank Research expects labour-market softness to persist, despite the August data reducing immediate concerns about a significant employment slowdown.