Fed Rate Hike Chances Rise as August Employment Data Reveals Mixed Signals

The August non-farm payrolls data from the US presented a strong picture, but analysts noted that underlying growth in the job market remains limited. The employment increase of 162,000 exceeded expectations of 56,000, and previous months' data was revised upwards by a total of 55,000. However, when excluding temporary effects on public and education employment, core employment growth remained at around 60,000.

The unemployment rate remained stable at 4.1 percent in August, while the labor force participation rate rose to 61.6 percent. The U6 unemployment indicator fell from 7.9 percent to 7.7 percent.

GF Securities stated that the August employment data weakened both extreme scenarios: 'employment is collapsing' and 'the labor market is overheating again.' The resilience of the employment market increased confidence that the economy could withstand further monetary tightening by the Fed, thus raising the likelihood of an interest rate hike later in the year.

The probability of a Fed rate hike in September rose from 50% to 58.6%, according to the FedWatch indicator. The US 2-year Treasury yield increased by 4 basis points to 4.37%, while the 10-year Treasury yield rose by 1 basis point to 4.78%. Leading US stock indices closed the day with limited declines, while AI hardware and semiconductor stocks rallied.